Key takeaways
- El Salvador considers launch of stablecoin
- Stablecoin called Colon Dollar is pegged to the US reserve
- El Salvador adoption of cryptocurrencies is not without controversies
On Monday, July 19, local news outlets revealed that the Central American nation had tabled a plan for a national digital currency. According to the report, the new currency will be backed by dollar reserves held by the central bank.
Further details also stated that the digital currency would be called "Colon Dollar." This is a montage of the previous legal tender in El Salvador, the Colon. The US dollars replaced it as legal tender at the turn of the century. In addition, representatives of the government have also held meetings with teams from Cardano and Algorand regarding the CBDC.
El Salvador continues to make new grounds in its quest to adopt digital currencies. President Bukele has taken an open approach and recently passed the Bitcoin Law making the popular token a legal tender in the country.
However, this actions are not without concerns with global financial regulators as opposed to the move. Financial giants like JPMorgan, the World Bank, and Bank of Settlement have all revealed their concerns at the decision.
In particular, the US bank suggested that legal adoption of the currency could lead to overloading the Bitcoin network. Furthermore, it could lead to financial risks of cannibalizing the liquidity of dollars by creating an imbalance in demand for Bitcoin/dollar conversion on the exchange set up by the government.
El Salvador is not the only country that has looked to create a national currency in recent months. In addition, countries like China and Korea have begun testing their CBDCs as they look to take a major stakeholdeR in the blockchain financial space.
Do you think that El Salvador's adoption of cryptocurrencies is good for the blockchain industry?
