Bitcoin is now officially legal tender in El Salvador


By Jay L. Zagorsky 3 minutes Read

The government has even gone further by promoting the use of cryptocurrency by give $ 30 in free bitcoins to citizens who register for its national digital wallet, known as Chivo, or “cool” in English. Foreigners who invest three bitcoins in the country—currently around $ 140,000– will be granted residency.

Panama plans to follow The advance of El Salvador.

Does making bitcoin legal tender mean that every store and merchant in El Salvador will now have to accept digital payments? If more countries are doing the same, what does it mean for consumers and businesses around the world?

Inasmuch as economist who study wealth and money, I think explaining briefly what legal tender is will help answer these questions.

What is legal tender?

Legal tender refers to money – usually coins and banknotes –that we must accept if it is offered in payment of a debt.

The front of every US bank note reads: “This note is legal tender for all public and private debts. »This declaration has been entered in federal law in various forms since the late 1800s.

The greenback is not legal tender only in the United States in El Salvador, for example, past of the colonist, his old currency, to the US dollar in 2001. Ecuador, Panama, East Timor, and the Federated States of Micronesia also all use the dollar as legal tender.

Do traders have to accept legal tender?

But despite the above definition, legal tender does not mean that all businesses must accept it as payment for a good or service.

This requirement only applies to debts owed to creditors. The ability for a store to refuse cash or other legal tender is explicitly stated on the websites of both US Treasury, who is in charge of print paper money and mint coins, and the Federal Reserve, which is responsible for distributing the currency to the country’s banks.

This is why many companies, such as Airlines companies, accept payments exclusively by credit card, and many small retailers only take cash.

Like the United States The Treasury emphasizes, there is “no federal law requiring any private business, person or organization to accept currency or coins as payment for goods or services.” Private companies are free to develop their own policies on whether or not to accept cash, unless there is a state law that says otherwise. “

And it wouldn’t be any different if the United States made bitcoin legal tender. Private companies would not have to accept it.

However, there is clearly some confusion in El Salvador on the issue. Its original bitcoin law, passed in June 2021, stipulate that “Any economic agent must accept bitcoin as a means of payment when it is offered to him by anyone who acquires a good or a service.”

This led to protests and aroused skepticism of economists and others. As a result, Salvadoran President Nayib Bukele tweeted in August that companies weren’t required to accept bitcoin.

Why did El Salvador make bitcoin legal tender?

El Salvador bets being the first to fully open its doors to bitcoin will help boost your economy.

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