{"id":1317,"date":"2021-09-02T14:47:02","date_gmt":"2021-09-02T19:47:02","guid":{"rendered":"http:\/\/agcus.net\/?p=1317"},"modified":"2026-02-04T19:14:15","modified_gmt":"2026-02-05T01:14:15","slug":"heres-what-bitcoin-soon-being-legal-tender-in-el-salvador-means","status":"publish","type":"post","link":"http:\/\/streamapse.com\/TAR\/?p=1317","title":{"rendered":"Here\u2019s What Bitcoin Soon Being \u2018Legal Tender\u2019 In El Salvador Means"},"content":{"rendered":"

CRYPTOCURRENCY NEWS<\/span><\/strong><\/p>\n

Jay L. Zagorsky<\/a>, Boston University<\/a><\/em><\/p>\n

On Sept. 7, 2021, El Salvador<\/a> will become the first country<\/a> to make bitcoin legal tender<\/a>.<\/p>\n

The government even went a step further in promoting the cryptocurrency\u2019s use by giving US$30 in free bitcoins to citizens who sign up<\/a> for its national digital wallet, known as \u201cChivo,\u201d or \u201ccool\u201d in English. Foreigners who invest three bitcoins in the country \u2013 currently about $140,000<\/a> \u2013 will be granted residency.<\/p>\n

Panama is considering following<\/a> El Salvador\u2019s lead.<\/p>\n

Does making bitcoin legal tender mean every store and merchant in El Salvador will now have to accept digital payments? If more countries do the same thing, what will this mean for consumers and businesses around the world?<\/p>\n

As an economist<\/a> who studies wealth and money<\/a>, I believe that briefly explaining what legal tender is will help answer these questions.<\/p>\n

What is legal tender?<\/h2>\n

Legal tender refers to money \u2013 typically coins and banknotes \u2013 that must be accepted<\/a> if offered in payment of a debt.<\/p>\n

The front of every U.S. banknote states \u201cThis note is legal tender for all debts public and private.\u201d This statement has been enshrined in federal law<\/a> in various forms since the late 1800s.<\/p>\n

The greenback is not legal tender in just the U.S. El Salvador, for example, switched from the colon, its previous currency, to the U.S. dollar in 2001<\/a>. Ecuador<\/a>, Panama<\/a>, East Timor<\/a> and the Federated States of Micronesia<\/a> also all use the dollar as legal tender.<\/p>\n

Do merchants have to accept legal tender?<\/h2>\n

But despite the definition above, legal tender doesn\u2019t mean all businesses must accept it in payment for a good or service.<\/p>\n

That requirement applies only to debts owed to creditors. The ability for a store to refuse cash or other legal tender is made explicit on the websites of both the U.S. Treasury<\/a>, which is in charge of printing paper money<\/a> and minting coins<\/a>, and the Federal Reserve<\/a>, which is in charge of distributing currency to the nation\u2019s banks.<\/p>\n

This is why many companies such as airlines<\/a> accept payments exclusively by credit card<\/a>, and many small retailers take only cash<\/a>.<\/p>\n

As the U.S. Treasury points out<\/a>, there is \u201cno federal statute mandating that a private business, a person or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.\u201d<\/p>\n

And this would be no different if the U.S. made bitcoin legal tender. Private businesses would not be required to accept it.<\/p>\n

There is clearly some confusion in El Salvador over the issue, however. Its original bitcoin law, passed in June 2021, states that<\/a> \u201cevery economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.\u201d<\/p>\n

This led to protests<\/a> and resulted in skeptcism<\/a> from economists and others<\/a>. As a result, El Salvador President Nayib Bukele tweeted<\/a> in August that businesses did not have to accept bitcoin.<\/p>\n

\"\"<\/a><\/p>\n

Why did El Salvador make bitcoin legal tender?<\/h2>\n

El Salvador is betting that being the first to open its doors completely to bitcoin will help boost its economy<\/a>.<\/p>\n

President Bukele said he believes this will encourage investors with cryptocurrency to spend more of it in his country<\/a>. He even has a plan to have El Salvador\u2019s state-run geothermal utility use energy from the country\u2019s volcanoes to mine bitcoin<\/a>.<\/p>\n

Creating, or mining, bitcoin<\/a> takes a lot of energy<\/a>, so mining makes sense only in places with cheap electricity.<\/p>\n

The $30 given to every citizen who joins the cryptocurrency craze will temporarily stimulate the economy. However, the overall impact will likely be a short-term boost. The impact of similar payments in other countries, like COVID-19 stimulus payments<\/a>, appear to end after people have spent the money<\/a>. Moreover, it\u2019s unclear El Salvador\u2019s increasingly indebted government<\/a> can even afford it.<\/p>\n

And the widespread adoption of bitcoin will likely take years. El Salvador has been installing 200 bitcoin ATMs<\/a> to allow people to convert cryptocurrency into dollars.<\/p>\n

Since just 30% of the Central American country\u2019s population even has a bank account<\/a>, I believe the U.S. dollar will still be used in El Salvador for a long time, even if its president wants to move toward bitcoin.\"The<\/p>\n

Jay L. Zagorsky<\/a>, Senior Lecturer, Questrom School of Business, Boston University<\/a><\/em><\/p>\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

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