El Salvador: Bitcoin Citizenship and Legal Tender, Explained
El Salvador President Nayib Bukele kept the promise to make Bitcoin legal tender. Now, Bitcoin can also get you citizenship in the country.
June 10 2021, Published 10:20 a.m. ET
The Bitcoin (BTC) community cheered the cryptocurrency’s milestone of becoming a legal tender in El Salvador. BTC's price rose about 15 percent to more than $37,000 after El Salvador lawmakers voted overwhelmingly in support of President Bukele's proposal to make Bitcoin an official currency in the country.
Recently, Bitcoin came under pressure with the price falling to levels not seen for months and nearly eroding its gains this year. It all started with Tesla making an about-face and stopping Bitcoin payments for car purchases. Tesla CEO Elon Musk argued that the cryptocurrency didn’t have an impressive impact on the environment.
El Salvador boosts confidence in Bitcoin
BTC's price dropped more as China stepped up its crypto crackdown with bans on institutional trading and warning to miners. Dealing another blow to the blue-chip crypto was the U.S. Treasury’s proposal to tighten crypto tax compliance. However, investors are starting to look past these setbacks after El Salvador’s legal tender move bolstered confidence in Bitcoin’s prospects as a payment tool and an investment instrument.
Bitcoin is a legal tender in El Salvador.
What El Salvador has done is elevate Bitcoin’s status. Bitcoin has become an official currency in the country just like the U.S. dollar and can be used to purchase products. Also, businesses and individuals in the country can use Bitcoin to pay debt and taxes.
Why El Salvador adopted Bitcoin
President Bukele sees Bitcoin heralding an economic boom as a legal tender. For example, the president predicts that making Bitcoin an official medium of exchange will promote tourism and innovation in the country. Also, Bukele counts on Bitcoin to expand financial inclusion and stimulate economic development.
El Salvador also counts on Bitcoin to make it easier for its citizens working abroad to send money back home. Since Bitcoin doesn’t require a bank account to receive or spend, it could unlock the economic potential of many unbanked citizens.
Which countries allow Bitcoin legal tender?
You can already use Bitcoin to buy from a diverse range of businesses in many countries, including the U.S. However, El Salvador became the first country to officially recognize Bitcoin as a currency.
The Bitcoin community hopes that El Salvador's endorsement is just the start and that more countries will follow suit. Broader adoption as a currency is expected to increase the demand for Bitcoin and potentially increase its value.
Bitcoin price prediction after it becomes El Salvador legal tender
Where will Bitcoin be in five years now that it has become an official currency of a country? Bitcoin price predictions show that it will continue to rise. According to Long Forecast, BTC's price will climb 13 percent from the current level to close 2021 at $42,160. The cryptocurrency should more than double its current price in 2022 to reach $79,500. Long Forecast predicts Bitcoin topping $88,800 in 2025.
According to Digital Coin Price, BTC will rise more than 60 percent from its current price to end 2021 at $62,700. It sees the crypto continuing to climb in the coming years to cross $75,000 in 2022, hit $100,000 in 2024, and touch $130,000 in 2025.
WalletInvestor expects Bitcoin to hit $170,000 in five years, which implies 350 percent upside potential over the current price. Billionaire SPAC king Chamath Palihapitiya has big plans when Bitcoin reaches $100,000 and $150,000.
Bitcoin citizenship and mining in El Salvador
Bitcoin becoming a legal tender in El Salvador has also made it easier for foreigners to secure citizenship in the country. If you can prove that you have invested in Bitcoin, President Bukele said that you could be offered citizenship in El Salvador.
The country is also ramping up efforts to become a Bitcoin mining hub powered by renewable energy from geothermal. It’s a strategy that could help El Salvador attract Bitcoin miners who are escaping Chinese restrictions. China has long been considered the crypto mining capital but the government isn't happy with the energy-hungry operation.
Is Bitcoin a good investment?
Bitcoin's price hit an all-time high of about $65,000 in April, which brought its lifetime returns to almost 80,000,000 percent. Since then, it has pulled back from that peak. Bitcoin still carries lifetime gains of about 50,000,000 percent over a period that the S&P 500 has only returned 300 percent.
Is it too late to invest in BTC? Bitcoin price predictions show that it will continue to rise, even hitting $170,000 in five years or rising 350 percent over the current level. Becoming a legal tender in El Salvador should increase Bitcoin’s awareness among investors, which would fuel its uptake and lift the price.