Late Monday, El Salvador’s president, Nayib Bukele, announced a second purchase of 200 bitcoins a fortnight before the official adoption of bitcoins. As of today’s trading levels, El Salvador owns 400 bitcoins, worth nearly $21 million.
Based on data from Coinbase, the bitcoin price is currently $52,486, up 1.5% from the previous day.
With effect from Tuesday, bitcoin will replace the US dollar as legal tender in El Salvador. In a tweet, Bulele said brokers “will buy more as the deadline nears.”
As a legal tender, bitcoin is required to be accepted as payment by all “economic agents.” Furthermore, bitcoin can be used to pay taxes.
Additionally, Venezuelans will be able to download “Chivo Wallet”, an app created by the government for the purpose of promoting the use of bitcoin.
“The process of #Bitcoin in El Salvador has a learning curve. Every step toward the future is like this, and we will not achieve everything in a day, nor in a month,” Bukele tweeted. “But we must break the paradigms of the past.”
Bukele, a right-wing populist who was elected in 2019, announced his plan to use bitcoin in June. When he first mentioned this, he said that El Salvador had partnered with digital financial company Strike to work out the details.
Hundreds of thousands of El Salvadorans without bank accounts were estimated by Strike’s CEO Jack Mallers at the time.
“They asked me to help write a plan and that they viewed bitcoin as a world-class currency and that we needed to put together a bitcoin plan to help these people,” he added.
People in poorer communities with less access to banks could use bitcoin as an alternative to traditional bank accounts because cryptocurrencies are stored in digital wallets rather than traditional bank accounts.
The Salvadoran government, though, has been asked to repeal the law, largely because social organizations fear the volatility of cryptocurrency.
It may be trending back toward the $65,000 all-time high it achieved in April, but the price of bitcoin suffered a dramatic drop earlier this summer, which reduced its value by more than half.
Others, more thinly traded cryptocurrencies, have even greater volatility, often fluctuating like a seesaw in response to speculative tweets by Tesla (TSLA) CEO Elon Musk.
Using bitcoin as legal tender could attract new investments to El Salvador, the government believes. Remittance commissions paid from abroad also hope to be reduced.
Approximately $5.9 million worth of remittances were received by El Salvador last year, according to the Central Reserve Bank.