El Salvador’s adoption of bitcoin delights fans
SAN SALVADOR, El Salvador — El Salvador’s approval of bitcoin as legal tender, making it the first country to do so, has delighted cryptocurrency supporters but left markets unconvinced.
The Central American nation’s Congress passed a bill late on Tuesday paving the way for bitcoin to be used in a variety of daily financial transactions from buying property to paying taxes.
It is the first time the highly volatile and decentralized cryptocurrency has been recognized by a national government and came as regulators in Europe, Asia and North America are moving to contain the market, which has grown tenfold in recent months.
Nigel Green, chief executive of financial consultancy deVere Group, said the decision made sense for countries like El Salvador, which uses the dollar as its official currency and is interested in finding an alternative that doesn’t come with the US currency’s political constraints.
Paraguayan lawmaker Carlos Rejala Helman wrote on Twitter that his own country had “an announcement” to make on cryptocurrencies soon.
Like El Salvador President Nayib Bukele, Rejala has added the bitcoin laser eyes meme to his profile picture, a signal in support of the cryptocurrency’s stunning rise in value.
Charlie Erit, of crypto asset manager ByteTree, told Agence FrancePresse that as usage increases, especially among the younger and less wealthy, this could lead to a softening of regulations.
The cryptocurrency market remains in relatively poor form.
While bitcoin was up 4.2 percent on Wednesday at more than $35,000, recovering from a close of $30,000 the day before, the price is still down 46 percent from its alltime high of $64,870 in mid-April.
The move by El Salvador has not pushed the cryptocurrency’s value significantly higher as was the case during a surge in late 2020 and early 2021 when back-to-back adoption announcements by respected financial firms drove the price upward.
“Big endorsements might also have made investors skeptical — as Elon Musk has demonstrated. If there’s an about-turn it can be very self-defeating,” Erith said.
Musk, the billionaire owner of Tesla, had been a cheerleader for cryptocurrencies in the first quarter on social media. But he has since changed his tune, oscillating between support and criticism.
“There is a risk El Salvador could simply become an island in a global sea of skepticism about the cryptocurrency,” said Susannah Streeter, a financial analyst at Hargreaves Lansdown.