GS Paper - 3 (Economy)

El Salvador on 7 September 2021 became the first country in the world to accept Bitcoin as legal tender, despite widespread domestic skepticism and international warnings of risks for consumers. President Nayib Bukele's government claims the move will give many Salvadorans access to bank services for the first time and save some $400 million in fees on remittances sent home from abroad every year.

What

  1. In June, El Salvador's parliament approved a law to allow the crypto money to be accepted as tender for all goods and services in the small Central American nation, along with the US dollar.
  2. The government is installing more than 200 Bitcoin teller machines, some guarded by soldiers to prevent possible arson by opponents.
  3. Economists and international bodies such as the World Bank, International Monetary Fund and Inter-American Development Bank have expressed concerns about El Salvador's bitcoin adoption.
  4. Bitcoin is criticised by regulators for its potential for illegal use -- notably in laundering money from criminal activities and financing terrorism.

What Is Bitcoin?

  1. Bitcoin is a digital currency created in January 2009.
  2. It follows the ideas set out in a whitepaper by the mysterious and pseudonymous Satoshi Nakamoto.
  3. Unlike fiat currency, bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain.