El Salvador may become the first country to make Bitcoin official tender, with President Nayib Bukele announcing that a law to overhaul the remittance-based economy would be introduced soon.
President Nayib Bukele announced El Salvador’s cooperation with digital wallet company Strike to construct the country’s modern financial infrastructure using Bitcoin technology in a video broadcast to Bitcoin 2021, a multiday conference in Miami described as the largest Bitcoin event in history.
Bukele said on Saturday that the action would make the Central American country the first in the world to formally accept cryptocurrencies as legal tender, adding that it would “allow the financial inclusion of thousands of people who are outside the legal economy.”
Next week I will send to congress a bill that will make Bitcoin a legal tender,” Bukele noted.
El Salvador, according to Bukele, teamed with digital financial business Strike to figure out the logistics of the decision.
El Salvador is primarily a cash economy, with around 70% of the population lacking bank accounts or credit cards. Remittances, or money sent back to El Salvador by migrants, contribute for more than 20% of the country’s GDP. For those foreign transfers, which might take days to arrive and occasionally involve a physical pick-up, incumbent providers can charge 10% or more in fees.
“Over 70% of the active population of El Salvador doesn’t have a bank account. They’re not in the financial system,” said Strike CEO Jack Mallers. “They asked me to help write a plan and that they viewed Bitcoin as a world-class currency and that we needed to put together a Bitcoin plan to help these people.”
“What’s transformative here is that Bitcoin is both the greatest reserve asset ever created and a superior monetary network. Holding Bitcoin provides a way to protect developing economies from potential shocks of fiat currency inflation,” continued Mallers.
Mallers said the decision will help unlock the power and potential of Bitcoin for everyday use cases on an open network that benefits individuals, businesses, and government services, speaking from the mainstage.
Bitcoin isn’t backed by anything tangible, and it doesn’t have the full trust and support of any single authority. Its worth is derived in part from the fact that it is digitally scarce; only 21 million Bitcoins will ever exist.
While details on how the rollout would operate are still being worked out, CNBC has learned that El Salvador has recruited a team of Bitcoin leaders to assist with the development of a new financial ecosystem with Bitcoin as the foundation.
Since Bukele’s New Ideas party controls the country’s Legislative Assembly, the bill is quite likely to succeed.
“It was an inevitability, but here already: the first country on track to make Bitcoin legal tender,” stated Adam Back, CEO of Blockstream.
Back stated that he intends to offer technology such as Liquid and satellite infrastructure in order to make El Salvador a global model.
“We’re pleased to help El Salvador on its journey towards adoption of the Bitcoin Standard,” he added.
This isn’t El Salvador’s first foray into the world of Bitcoin. Strike released its mobile payments app in March, and it immediately became the country’s most downloaded software.
Bukele has a large following, and his populist New Ideas party recently won a landslide of votes. The new assembly, on the other hand, has recently come under fire for ousting the attorney general and top judges. The US Agency for International Development withdrew money from El Salvador’s national police and a public information institute as a result of the move, redirecting cash to civil society organizations.
The United States Dollar is the official currency of El Salvador at the moment.