El Salvador will become the first nation in the world to introduce bitcoin as legal tender on Tuesday, a step President Nayib Bukele says could help Salvadorans abroad to save millions in commissions on remittances.<\/p>\n\n\n\n
Despite this, citizens are skeptical of the step and are concerned about the cryptocurrency’s volatility. There are also questions of how it will work once implemented.<\/p>\n\n\n\n
Here are some pros and cons of the plan that have emerged:<\/p>\n\n\n\n
OVERSEAS REMITTANCES:<\/p>\n\n\n\n
In 2020, Salvadorans abroad sent about $6 billion to their families back home, mostly from the United States.<\/p>\n\n\n\n
Bukele says introducing Bitcoin as legal tender could allow Salvadorans to save $400 million, which normally goes to commissions for remittances from abroad.<\/p>\n\n\n\n
In addition to the reluctance and suspicion of Salvadorians on this, World Bank data show also that El Salvador’s U.S. remittance costs are already among the globe’s lowest.<\/p>\n\n\n\n
<span style=”font-weight: 400;”>CARBON FOOTPRINT<\/span><\/p>\n\n\n\n
Bitcoin’s rise has raised questions about the environmental impact of cryptocurrencies.<\/p>\n\n\n\n
Bukele has tried to allay sustainability concerns by asking the government-owned geothermal power company LaGeo to offer bitcoin mining facilities that use renewable energy from volcanic activities.<\/p>\n\n\n\n
<span style=”font-weight: 400;”>REGULATORY COMPLIANCE<\/span><\/p>\n\n\n\n
Bitcoin’s introduction has triggered fears of an increase in regulatory, financial and operational risks for financial institutions.<\/p>\n\n\n\n
Indeed, when Bukele approved the Bitcoin law, credit rating agency Moody’s downgraded El Salvador’s credit rating.<\/p>\n\n\n\n
<span style=”font-weight: 400;”>FOREIGN EXCHANGE<\/span><\/p>\n\n\n\n
Bukele has set up a $150 million fund to convert Bitcoin into dollars, however, there are lingering doubts about how the nation will deal with the risks associated with large fluctuations in the digital currency.<\/p>\n\n\n