Last week saw El Salvador announce its intention to make Bitcoin legal tender. This would mark the first time that any country had classified a cryptocurrency as a legitimate currency.
The proposal by President Nayib Bukele was quickly passed through the nation’s Congress and it is hoped that Bitcoin would join the US dollar in becoming legal tender within 90 days. As such, all businesses in the Central American country would be required to accept Bitcoin payments, unless it was unable to process the crypto transaction.
The moves were made in a bid to make it easier for people in El Salvador to send and receive money from abroad. It is thought that over two million Salvadoreans live abroad, and the moves to implement Bitcoin as legal tender would enable fast and frictionless transactions.
An interesting twist to this story is the fact that El Salvador is in the process of drilling tunnels into its many volcanoes in the hope of creating geothermal Bitcoin mining stations. Such a plan would go some way into answering many of the environmental questions that have been raised about the cryptocurrency.
Key problems facing El Salvador’s Bitcoin plan
While El Salvador’s plan caught the attention of many cryptocurrency advocates, it looks like the world’s leading financial institutions are less impressed. This can be seen in the fact that the World Bank said that it would be unwilling to help the nation implement Bitcoin as a legal currency.
The World Bank stated that it had reservations about the transparency of the cryptocurrency, as well as concerns about its environmental impact. Such concerns are interesting, as the World Bank has invested a significant amount of money in fossil fuels companies in the past few years. Plus each transaction made with Bitcoin is held on a public ledger as a way of eliminating any transparency concerns.
Despite this, there are still major doubts about whether El Salvador could meet its three month deadline for becoming the first Bitcoin nation. Plus, the International Monetary Fund also expressed misgivings about El Salvador’s plan. With doubts about everything from the financial and legal issues surrounding Bitcoin, it means that El Salvador would have to go it alone in its ambitious crypto project.
What this mean for the value of Bitcoin
The value of Bitcoin stayed around the $40,000 mark following the news that the World Bank was unwilling to help El Salvador’s plan to become the first Bitcoin country. The cryptocurrency has suffered a series of price drops throughout 2021 following some record rises in value in 2020.
Much of this volatility has been attributed to comments made by Elon Musk. The Tesla boss has admitted his concerns about the environmental impact of Bitcoin, and such concerns are going to have to be addressed if the cryptocurrency has any long-term future.
Despite this, the willingness of El Salvador to adopt Bitcoin as legal tender suggests that this crypto will find a way to become a true global currency sooner or later.