El Salvador President Nayib Bukele recently announced that he will be making Bitcoin legal tender alongside the US dollar. The bill passed 62 out of 84 votes. El Salvador's changes will come into effect within 90 days.
Nayib hopes that the move will boost the local economy and help drive tourism and investment in the nation. But not everyone is sold on the move despite there being a strong show of support.
Criticism has been aired relating to Bitcoins volatility and its impacts can do more harm than good. With over two million El Salvadorians living abroad the biggest contributor to the nation's economy is former citizens and nationals sending money back to their home country, equating to $US5.9 billion a year. The largest contributor to the nation's GDP at around 22%.
The countries primary economic model which makes up 70% of its employment sector is an informal economy. This consists of unregulated work, No minimum wages, no work place protections, no health and safety and no state protections. People are often left to fend on their own and you'll find people working as farm hands, from their own homes, unregulated markets, informal organisations etc.
Bitcoin generated $US4 billion to the countries GDP making up almost a quarter of the nation's income. You can see why the move was taken to accept Bitcoin as legal tender.
You can read abit more about it Here and Here
Geothermal mining
Advances don't stop there with the President also announcing that El Salvador will be moving to mine bitcoin through power generated from the use of El Salvadorian volcano's
El Salvador's main power generation is Geothermal with a large portion of the power being wasted to over supply or being sent out to cities and towns on the outskirts.
The President has plans to establish mining hubs close to the power plants to provide them with cheap and clean energy and hopes to become the world mining destination for Bitcoin.
You can read more about it Here
Chinese Hash Rate reduction
The hash rate of bitcoin mining in China has begun to rapidly decline with Xinjiang province order to shurt down bitcoin mining by 2pm Wednesday.
This is not the first to receive its order as many more have also been issues the notice to comply. You can read more Here
The last time this area was forced to shut down due to a security risk Bitcoin mining dropped by 25% a quarter of all computing power. It's important to note that this area is an industrial zone which is backed up by coal power plants. You can read more Here
These changes will provide El Salvador with a possible market to leverage offered cheap power and freedom to mine. However the nation isn't without its challenges and we are yet to see if mining operations will move to El Salvador or continue to rise in the US and US states battle it out for top spot.
Opinion
Legalising Bitcoin as tender is a dangerous move so early in the game by a government and where I can see that the volatility of Bitcoin price probably doesn't impact El Salvador as much due to its low economy and lack of industry it will still have negative impacts as people already struggling financially rush in to try and make riches. But if it's one thing we have come to learn is that investing in crypto is a risk and if El Salvador wants to legalise bitcoin he also needs to regulate and back up the price or he risks causing further damage and harm to not just his own country but the sector.
This is why many nations are moving to retain bitcoin as an investment but enter the market with their own CBDC stable coins. Effectively backing up the economy and ensuring stability.
What are your thoughts on El Salvador's changes. Will it work or fail?