MIAMI – El Salvador is trying to pass legislation that will make it the first sovereign country in the world to accept bitcoin as legal tender alongside the US dollar.
In a video released at Bitcoin 2021, a multi-day conference in Miami heralded as the largest Bitcoin event in history, President Nayyib Bukele announced El Salvador’s partnership with digital wallet company Strike to create a modern infrastructure for financial institutions using Bitcoin technology.
“Next week, I’m going to submit a bill to Congress that makes bitcoin legal tender,” Bukele said.
Jack Mullers, founder of payment platform Lightning Network Strike, said it would be seen as “a tangible global blow to Bitcoin.”
“What is changing here is that bitcoin is both the largest reserve asset ever created and an excellent money network. Holding bitcoins offers a way to protect emerging economies from potential fiat inflation shocks, ”continued Mullers.
Speaking from the main stage, Mullers said the move would help unleash the power and potential of bitcoin for everyday use on the open network for the benefit of individuals, businesses and public sector services.
El Salvador’s economy is mostly cash-based, where about 70% of the population does not have a bank account or credit card. Remittances or money sent home by migrants account for over 20% of El Salvador’s gross domestic product. Historical Services may charge a fee of 10% or more for these international transfers, which can sometimes take days to arrive and sometimes require physical collection.
Bitcoin is not backed by assets and does not enjoy the full trust and support of the government. Its value is partly due to the fact that it is numerically rare; there will be only 21 million bitcoins.
While details on how the launch will work are still available, CNBC learns that El Salvador has put together a team of bitcoin executives to help build a new financial ecosystem with bitcoin locally.
The Bukele New Ideas Party controls the country’s Legislative Assembly, so the bill is likely to be passed.
“It was inevitable, but it has already happened: the first country on the road to making bitcoin legal tender,” said Adam Back, CEO of Blockstream.
Beck said he intends to use technologies such as fluid and satellite infrastructure to make El Salvador a model for the world.
“We are delighted to assist El Salvador on its journey towards adopting the Bitcoin standard,” he said.
This is not El Salvador’s first step towards bitcoin. Strike launched its mobile payment app there in March, which quickly became the first downloaded app in the country.
Bukele was very popular, his populist New Ideas party won the last elections. Recently, however, the new assembly has come under fire for the dismissal of the attorney general and senior magistrates. The move prompted the US Agency for International Development to forgo aid to the El Salvadorian National Police and public information agency, rather than channeling funds to civil society groups.