El Salvador Accepts Bitcoin as Legal Tender

The president of El Salvador wants to go bigger with Bitcoin. Nayib Bukele is the current and forty-third president of El Salvador. He was born July 24,1981 in San Salvador. Bukele officially became president of El Salvador by winning the presidential election on June 1, 2019. 

El Salvador has been known to be a very vulnerable country. It has a high rate of violence and crimes but a low level of education. Many young students dropout of school to start working. Education in El Salvador is not as important to families because they need their children’s help selling items in the markets. Only 33% of students who are old enough to attend secondary school actually attend school and the others set aside their education. With such a low number of students, there is a lack of opportunities for children to advance in their education or to expand their knowledge. Not only is their education level low, but workers have a low pay wage. In other words, no matter how many hours they work, they won’t make enough money to support their family. 

Last year, President Bukele made El Salvador the first nation to adopt Bitcoin as a legal tender. This means that Bitcoin is now accepted as a payment method if offered. Bukele also wants to use a geothermal power plant from their country’s volcanoes to verify transactions for the cryptocurrency Bitcoin. This power plant holds about 300 computers working all day and all night. This geothermal power will help power Bitcoin mining. Bitcoin mining is the process of earning Bitcoin in exchange for running the verification process to validate Bitcoin transactions. This process may help our economy, but it damages our environment by creating about 40 billion pounds of carbon emissions. Carbon emissions can pollute our air and contribute to global warming. 

One positive outcome people from El Salvador have experienced is that they are able to afford more materials than before. María del Carmen Aguirre, is a woman in El Salvador who owns a store located along El Salvador’s Pacific Coast. She says, “Thanks to my bitcoin earnings, I was able to buy a lot for my little store,”. Since there are not many franchised stores in El Salvador, people create their own small businesses in markets. Being able to afford materials to make goods to sell is very important. Aguirre also says “If I’d gotten in before, I would have been able to buy a car with my earnings.”  Another positive outcome from Bitcoin is the number of tourists who are able to afford items while visiting. For example, Jaap Jan van Hengel and his brother are both from the Netherlands visiting El Salvador, and they have been able to buy nearly everything with Bitcoin. Bitcoin has been able to make things very accessible to the two brothers and easier to purchase. 

However, many people find Bitcoin unreliable and damaging to El Salvador’s economy. Jamie Reusche is vice president of Moody’s Sovereign Risk Group, which is an investor’s service that provides international financial research on bonds issued by commercial and government entities. Reusche is skeptical about bitcoin and its benefits for El Salvador. After finding out El Salvador adopted Bitcoin, Reusche said, “It’s a heck of a gamble. This would be the first of its kind throughout the world.” Moody’s estimates show that El Salvador may have lost twenty-two million dollars when Bitcoin took over. This puts the country’s economy at risk and can increase the amount of poverty. Not only has El Salvador lost money, but Bitcoin has also lost a quarter of its value since it became a legal tender. 

In conclusion, El Salvador has had many different responses after accepting Bitcoin as a legal tender. Some reasons impact the country negatively and some positively. Over time, President Bukele hopes to see progress in its economy while using Bitcoin.