While many people in El Salvador remain worried, the country’s Congress has approved a law to create a $150 million (~£109 million) Bitcoin fund in order to promote Bitcoin’s speedy adoption.
El Salvador is just one week away from one of the most important financial transformations in the world’s history. Its financial institutions are preparing to adopt BTC as legal tender on 7th September. The fund will also help to facilitate conversions from Bitcoin to US dollars as well as support the crypto industry in the country. The law was approved with 64 votes in favour and 14 votes against on Tuesday, 31st August.
According to Maria Luisa Hayem Brevé, who became the Salvadoran minister of the economy in 2019, the initial amount might very well be increased in the future. This may be connected with the fact that the money will be redirected from the $500 million (~£363 million) COVID-19 relief fund of the Central American Bank for Economic Integration (CABEI). Hundreds of protesters have raised their voices against President Nayib Bukele’s Bitcoin law and are now taking it to the streets. However, the minister doesn’t plan to change the whole project because of its critical importance for the whole world.
The fund will be administered by the State Development Bank of El Salvador (BANDESAL). The government will spend up to $75 million (~£54 million) to airdrop $30 worth (~£21) of Bitcoin into citizens’ crypto wallets, accessed by an online app. That funding would cover the cost of seeding 2.5 million users with Bitcoin in a country of 6.5 million.
At least 200 ATMs and 50 consulting centres from the government crypto app Chivo are being installed in different parts of the country — users will be able to deposit and withdraw money without paying commissions.
El Salvador became the first country in the world to adopt Bitcoin as legal tender. President Nayib Bukele has previously stated that he hopes that this initiative will boost foreign investment, improve financial inclusion and generate jobs.
Analysts at Bank of America (BofA), one of the largest financial institutions in the US, believe El Salvador may benefit from several advantages of Bitcoin adoption. Experts from the bank noted that the country’s decision to legalise the cryptocurrency could potentially reduce the cost of remittances, which amount to almost a quarter of El Salvador’s GDP. This will probably have a positive impact on residents’ disposable income.
The IMF has previously warned of the consequences of Bitcoin legalisation. The organisation believes that the countries that adopt digital assets as national currencies or legal tender will risk their economic stability.
El Salvador’s Congress has backed the $150 million (~£109 million) fund in order to facilitate Bitcoin to US dollar conversions. The country will be the first in the world to use Bitcoin as legal tender.
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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