Bitcoin is undergoing the biggest test in its 12-year history as El Salvador becomes the first country to adopt it as legal tender Tuesday.
Both enthusiasts and detractors of crytocurrencies will be monitoring the experiment to see if a significant number of people want to transact with Bitcoin when it circulates alongside the U.S. dollar, and whether it brings any benefits to the violent, impoverished Central American nation.
The country bought 400 bitcoins ahead of the roll-out, with a market value of about $20 million at current prices. The country plans to buy “a lot more” of them, President Nayib Bukele said via Twitter, after buying the first batch of 200.
Bitcoin ATMs
Bukele’s administration has installed 200 Bitcoin ATMs around the country that can be used to exchange the cryptocurrency for U.S. dollars. The Finance Ministry created a $150 million fund at state-run bank Banco de Desarrollo de la Republica de El Salvador, Bandesal, to back the transactions.
The dollar will remain the national currency for public accounting purposes and merchants who are technologically unable to receive the e-currency will be exempt from the law, the government has said.
El Salvador’s dollarized economy is heavily reliant on remittances sent home by migrants overseas, which totalled $6 billion last year and account for roughly a fifth of gross domestic product. Bukele says Bitcoin could save Salvadorans $400 million a year in fees for these transactions