How El Salvador decided to use the US dollar as their currency?

A lot of people in El Salvador were already buy and selling stuff directly in US Dollars before. After the switch, the Government made that fully legal, started taking/making payments in Dollars and set a fixed value to Colon to Dollar exchange rate so that 8.75 Colon could be traded for 1 US Dollar. They bought them.

Why did El Salvador use the US dollar?

El Salvador’s decision to make the U.S. dollar its official currency was made in the context of sound macroeconomic fundamentals. Inflation was low and stable, the economy was growing, public and external debt were manageable, and there was no turmoil in the banking system.

How did El Salvador adopt the US dollar?

On January 1, 2001, under the government of President Francisco Flores, the Law of Monetary Integration went into effect and allowed the free circulation of U.S. dollar in the country (see dollarization), with a fixed exchange rate of 8.75 colones.

When did El Salvador use the US dollar?

The Low Down on El Salvador Currency

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Prior to the use of the USD in El Salvador, the Salvadoran colon was the official currency. The colon was used between 1892 and 2001. The USD was adopted in 2001, with a fixed exchange rate of 8.75 colones per dollar.

Why did El Salvador change its currency to Bitcoin?

Bukele is touting Bitcoin as a way for Salvadorans to reduce the fees they pay to send and receive remittances—which make up 22% of El Salvador’s GDP, mostly from the U.S.—and as a way for the 70% of Salvadorans who are unbanked to access financial services.

Will El Salvador change its currency?

SAN SALVADOR — El Salvador rushed to iron out snags on Tuesday after becoming the first country to adopt bitcoin as legal tender. … The change means businesses should accept payment in bitcoin alongside the U.S. dollar, which has been El Salvador’s official currency since 2001 and will remain legal tender.

When did El Salvador change its currency to bitcoin?

On June 5, El Salvador President Nayib Bukele declared that bitcoin, the first cryptocurrency, would become legal tender in El Salvador. A few days later, the Bitcoin Law was passed, to take effect Sept. 7.

What currency does El Salvador use?

EL ZONTE, El Salvador — A growing number of Salvadorans have experimented with bitcoin since the country became the first to adopt it as legal tender last month, with a couple of million dollars sent daily by migrants using the cryptocurrency.

How is the economy in El Salvador?

El Salvador has experienced modest economic growth in recent decades, with annual GDP growth exceeding 3 percent only twice between 2000 and 2020, but achieved a significant decline in poverty and inequality.

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Does El Salvador use the US dollar?

“Monetary integration is our bullet-proofing mechanism for joining the globalised market,” said Mr Rafael Barraza, director of El Salvador’s central bank. … The change of currency is expected to reactivate the economy and attract foreign investment.

Why did bitcoin drop when El Salvador adopt?

The El Salvadoran government’s wallet, Chivo, was not available on many app stores. Then the huge number of users registering on it forced the government to suspend the app briefly to add servers and increase capacity. All these hiccups had a bearing on Bitcoin’s price.

Is bitcoin the only currency in El Salvador?

El Salvador’s government holds 550 Bitcoin, Bukele said, which is equivalent to about $26 million. The country’s other currency is the U.S. dollar.