El Salvador is the first country in the world to accept bitcoin as a legal tender even though it is a fact that its value highly depreciates even in an hour. President Nayib Bukele has adopted the digital currency at a lightning speed. Every financial institution including the International Monetary Fund and the World Bank has been surprised by the move as citizens are paying taxes in a highly volatile currency and the government bonds may shatter soon. It is simultaneously being worried that national and international gangs may take advantage of it and swap bitcoin with fiat currencies. However, the bitcoin enthusiasts have welcomed the El Salvador move.
Market analysts are highly impressed with the decision of the El Salvador government to embrace bitcoin as a legal tender.
About three-fourths of El Salvador's popular has been deprived of easy payment solution access as they have no bank account. Bitcoin in the country is learned to be banking the unbanked. A government-backed crypto wallet in the form of a mobile app is reaching more people than the banking service providers. A small-scale experiment in a seaside town El Zonte is successful moderately and is witnessing more efficient functioning of the local economy.
However, there are some challenges that bitcoin is facing in the country. Only about 45 percent of the population has access to the internet. Using the bitcoin app requires an internet connection.
A research institute in Guatemala finds employers are keeping the savings in USD and bitcoin is basically used in paying salaries to the workers. This is a clear example of class divide and is believed to trigger social tensions. In fact, this may become an ample recipe for disaster.
It is too early to judge whether bitcoin may succeed in El Salvador or may struggle in providing access to the entire capital due to various local challenges.