El Salvador Purchases 400 Bitcoins One Day Before Bitcoin Becomes Legal Tender

Public Backlash Spreads... Economic Damage May Worsen if Market Prices Plummet

Citizens protesting against the adoption of Bitcoin as legal tender in El Salvador [Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Suhwan] The government of El Salvador revealed on the 7th (local time), one day before becoming the first in the world to recognize the cryptocurrency Bitcoin as legal tender, that it had purchased 400 Bitcoins.

According to major foreign media on the 6th, President Nayib Bukele of El Salvador announced on Twitter that the government had bought 200 Bitcoins, and later tweeted that it had purchased an additional 200 Bitcoins, bringing the total to 400.

The Bitcoins purchased by the El Salvador government are worth approximately 20 million USD (about 23.2 billion KRW) at current market prices.

Earlier, in June, El Salvador passed a bill to recognize Bitcoin as legal tender for the first time in the world.

Accordingly, from the 7th, Bitcoin will have legal tender status alongside the existing official currency, the US dollar, in El Salvador.

Bitcoin can actually be used to buy and sell goods at stores, and government taxes can also be paid in Bitcoin.

In El Salvador, 70% of the population does not use the existing banking system, and remittances sent by overseas immigrants account for about one-quarter of last year’s gross domestic product (GDP), indicating a high dependence on remittances.

President Bukele has strongly advocated for the adoption of Bitcoin, stating that using Bitcoin will allow immigrants to send remittances to their home country much more cheaply and will revitalize the economy.

Ahead of the official circulation of Bitcoin, the El Salvador government installed 200 ATMs and 50 staffed branches nationwide where Bitcoin can be deposited and withdrawn in dollars.

Juan Pablo Thieriot, CEO of digital money platform company Uphold, expressed optimism, saying that El Salvador needs to find alternatives other than the dollar to offset the negative impact of the US’s large-scale economic stimulus on the dollar’s value.

However, negative public opinion remains among ordinary citizens.

According to a poll released on the 2nd, more than two-thirds of El Salvador’s population opposed the government’s adoption of Bitcoin as legal tender.

Above all, foreign media reported that even one day before Bitcoin became legal tender, many people “did not even know what Bitcoin was,” indicating a sense of concern.

In a survey conducted by major foreign media targeting 20 stores, restaurants, and coffee shops in downtown San Salvador, only three said they would accept Bitcoin from the 7th, while the rest said they were not even prepared for Bitcoin payments.

Experts have criticized that if Bitcoin prices fall, it could impose a greater burden on the already impoverished people of El Salvador, undermine economic stability, and encourage the misuse of Bitcoin for money laundering and other crimes.

Meanwhile, on the day President Bukele announced the Bitcoin purchase, Bitcoin prices surged.

According to financial information company Refinitiv, Bitcoin prices rose 1.49% on the afternoon of the day (local time), reaching the 52,680 USD range.