El Salvador on Wednesday became the first nation in the world to convert bitcoin into legal tender, a project championed by President Nayib Bukele to boost the growth of the Central American country.
Thirteen years after its creation, this is a new step for this virtual currency, which is however regularly criticized for its illegal uses, even if recent examples have shown that the transparency of its network could also work against criminals.
“The bitcoin law has just been approved by qualified majority” by the legislature, President Bukele tweeted after the vote, calling the decision historic.
Concretely, in this small country where four out of ten people live in poverty, this law should eventually allow the use of bitcoin for many aspects of daily life, from the purchase of real estate to tax contributions.
Currently, El Salvador’s main currency is the US dollar, and how the country plans to implement bitcoin as a functional currency is unclear.
Politically, this decision is in any case a way for El Salvador to assert its independence vis-à-vis the American currency.
Of the 84 congressmen, 62 of them approved the bill, proposed by the president last week.
The law, which contains only 16 articles, was passed with the support of Bukele’s allies, despite skepticism from opposition parties who refused to support it, criticizing the speed of the vote.
By law, “the exchange rate” between bitcoin and the US dollar “will be freely established by the market.”
During the Bitcoin 2021 conference held in Miami on June 4 and 5, Mr. Bukele defended this project in a video message, believing that it would bring “financial inclusion, investment, tourism , innovation and economic development ”in the country.
For the 39-year-old leader, bitcoin represents “the fastest way to transfer” those billions of dollars in remittances and to prevent “millions of dollars” from going into the pockets of middlemen.
In the dollarized economy of El Salvador, Salvadorians’ remittances from abroad constitute a significant support and equivalent to 22% of the gross domestic product (GDP).
With the legalization of bitcoin, this would make it possible, when transferring money from the entire diaspora, to avoid exchange fees, commissions, etc.
“This law will make El Salvador more visible in the world, we will be more attractive for foreign investment,” said Romeo Auerbach, who belongs to the party of the Grand Alliance for National Unity, an ally of Bukele.
On the other hand, opposition MP Anabel Belloso (FMLN) did not hide her skepticism: “the law has many implications for the economic sphere and not everyone is clear on how it will work, in taking into account the fact that cryptocurrencies are volatile in the market, they are unstable ”.
The cryptocurrency market grew to over $ 2.5 trillion in mid-May 2021, according to the Coinmarketcap website – which lists nearly 10,000 cryptocurrencies, boosted by growing interest from Wall Street and Silicon investors Valley.
But bitcoin’s volatility – which currently has a court value of $ 33,814 and its obscure legal status has raised several questions whether it should replace traditional currencies for day-to-day transactions.