INSUBCONTINENT EXCLUSIVE:
7, 2021, El Salvador will become the first country to make bitcoin legal tender.The government even went a step further in promoting the
El Salvador's lead.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?As an economist who studies wealth
and money, I believe that briefly explaining what legal tender is will help answer these questions.What is legal tender?Legal tender refers
the late 1800s.The greenback is not legal tender in just the United States El Salvador, for example, switched from the colon, its previous
currency, to the United States dollar in 2001
Ecuador, Panama, East Timor and the Federated States of Micronesia also all use the dollar as legal tender.Do merchants have to accept legal
tender?But despite the definition above, legal tender doesn't mean all businesses must accept it in payment for a good or service.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 United States Treasury, which is
in charge of printing paper money and minting coins, and the Federal Reserve, which is in charge of distributing currency to the nation's
banks.This is why many companies such as airlines accept payments exclusively by credit card, and many small retailers take only cash.As the
currency or coins as payment for goods or services
this would be no different if the United States made bitcoin legal tender
Private businesses would not be required to accept it.There is clearly some confusion in El Salvador over the issue, however
As a result, El Salvador President Nayib Bukele tweeted in August that businesses did not have to accept bitcoin.Why did El Salvador make
bitcoin legal tender?El Salvador is betting that being the first to open its doors completely to bitcoin will help boost its
economy.President Bukele said he believes this will encourage investors with cryptocurrency to spend more of it in his country
He even has a plan to have El Salvador's state-run geothermal utility use energy from the country's volcanoes to mine bitcoin.Creating,
or mining, bitcointakes a lot of energy, so mining makes sense only in places with cheap electricity.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, appear to end after people have spent the money
Moreover, it's unclear El Salvador's increasingly indebted government can even afford it.And the widespread adoption of bitcoin will
El Salvador has been installing 200 bitcoin ATMs to allow people to convert cryptocurrency into dollars.Since just 30% of the Central
American country's population even has a bank account, I believe the United States dollar will still be used in El Salvador for a long
time, even if its president wants to move toward bitcoin.Jay L
Zagorsky, Senior Lecturer, Questrom School of Business, Boston UniversityThis article is republished from The Conversation under a Creative
Read the original article.
