Adoption of cryptocurrency by EI-Salvador

Abstract

Despite significant domestic skepticism about cryptocurrencies and international warnings about consumer concerns, E! Salvador has become the first government in the world to adopt bitcoin as a legal currency. The government of President Nayib Bukele argues that the decision would provide many residents of El-Salvador with access to financial services for the first time and save about $400 mil. of remittances that are sent from abroad each year. El Salvador's parliament enacted a bill in June 2021 that allows crypto money to be accepted as tender alongside the US dollar for all products and services in the Central American country. In the dollarized economy, remittances account for about 25 percent of the GDP, with an estimated 1.5 million foreigners sending money in dollars through firms like Western Union. According to World Bank data, E! Salvador earned slightly higher than $5.9 billion only in 2020 from people outside the country, primarily in United States "1. Our research discusses EI Salvador's political and economic background, the grounds and reasons for bitcoin's adoption as a legal currency, and its influence on El Salvador and the rest of the world. El-Salvador is a real-world example of how the bitcoin experiment would play out as a country's legal currency, with all large and small pocket transactions possible in Bitcoins. The report briefly considers how cryptocurrencies are perceived around the world, as well as the challenges that any Cryptocurrency faces in terms of adoption, such as digital security practices, the transition from a cashbased to a digital economy, changing Blockchain technology, and digital currency infrastructure.