What is the first country to accept Bitcoin now?

 One year after the recognition of Bitcoin as currency, El Salvador is facing the risk of default and many other problems.

On September 7, 2021, El Salvador enacted the Bitcoin Law, becoming the first country in the world to adopt cryptocurrencies as national currency, despite many experts' warnings.

Bitcoin posters outside a grocery store in El Zonte Beach in Chiltiupan. Photo taken in June 2021. Photo: Reuters
Bitcoin posters outside a grocery store at El Zonte beach in Chiltiupan in June 2021. Photo: Reuters

Support Bitcoin Despite Controversy

Before the Bitcoin law came into effect, there were many problems. Instead of informing the people, President Nayib Bukele announced that he was submitting a bill related to Bitcoin at a conference on digital currencies in May 2021 in Miami (USA). Before that, he used to take to Twitter to share his habit of buying Bitcoin randomly, like when naked or in the toilet.

"I was shocked when I heard the announcement. No one knew what was going on. I called sources close to the government of El Salvador but no one heard anything," said Mariana Belloso, an independent journalist. consider then.

After the passage of the Bitcoin Law, Bukele took to Twitter to talk about his excitement, expressing his ambition to mine Bitcoin with geothermal energy as well as sharing his vision for the digital currency. All content is written in English.

Bukele's most controversial decision after accepting Bitcoin was to launch Chivo Wallet and build a series of Bitcoin ATMs, while promising to give each citizen $30 in digital currency to use. However, after its launch, the wallet frequently encountered errors, as well as being turned into a tool for criminals. According to statistics, almost 1,000 cases of wallet identity theft happened in the first three months alone.

On September 15, 2021, thousands of El Salvadorans took to the streets to protest the enactment of the law. According to a poll conducted by the University of Central America at the time, seven out of 10 El Salvadorans polled said they opposed the Bitcoin Law, including leading experts on cryptocurrencies and blockchain.

In November of the same year, Bukele announced a new project called Bitcoin City, located in the volcanic Conchagua region. "So far, the people of El Salvador have used the terrain surrounding the volcano to cultivate because the soil is fertile. Volcanoes are a symbol of life for Salvadorans. But now, everything has changed. transform," commented Professor Jorge Cuellar of Dartmouth College.

Outline of Bitcoin City posted on Twitter by President Bukele.
Outline of "Bitcoin City" was posted on Twitter by President Bukele.

Bukele said he was inspired by a story by Reddit user Luka Magnotta in 2013. Magnotta said he came from the future and described society back then as "without a central bank", and people early Bitcoin "lived like kings in walled cities".

In order to attract investment for Bitcoin City, the government of El Salvador approved "volcanic bonds" worth more than a billion dollars. Half is used to build infrastructure and the other half to buy new Bitcoins. To date, Bukele claims to have purchased 2,400 Bitcoins for over $100 million. Currently, this amount of digital currency has lost 60% of its value due to market fluctuations, and "volcanic bonds" are not interested by investors.

A series of obvious dangers

The International Monetary Fund (IMF) warns the Central Ame

rican country should get rid of Bitcoin if it wants to save its economy. The Central American country owes $23 billion and must pay $800 million to the IMF by 2023. If they can't pay, they risk becoming the first country to default on Bitcoin.

Environmental factors when building Bitcoin City also cause concern. According to Bukele's announcement, geothermal source from volcanoes is a clean energy for Bitcoin mining, but in fact, the country currently only mines about 27%. "It's still an extremely expensive source of energy. To build that infrastructure requires a lot of capital, which is harmful to the environment in the process," said Professor Cuellar.

According to him, the construction of power plants requires a lot of groundwater. Meanwhile, El Salvador is a country with a severe shortage of water, which must be imported from outside. Rollingstone cited statistics showing that more than 600,000 people in El Salvador do not have access to clean water. The country could run out of water within 80 years.

Experts say that, even if Bukele's plans are successful, Bitcoin is still only for the rich. "To invest in Bitcoin, people have to have a higher-than-average income to withstand price fluctuations. It's not for the masses of people who only have $300 a month in income," the economist said. Carmen Tatiana Marroquin said.

According to Marroquín, Bukele and the El Salvador government seem to be "gambling with people's money" after the "bottom-fishing" of Bitcoin, but then the digital currency continues to decline. “To date, Bitcoin-related problems in El Salvador have been like a car crash in slow motion,” Marroquín said. She also said that the decision belongs to the elite, but the people will be directly affected.
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