With Bitcoin having a topsy-turvy journey (influenced mostly by the actions of Elon Musk) in recent times, many have remained skeptical of its usage (or other cryptocurrencies, for that matter). However, that might change, as The Republic of El Salvador might just become the first country in the world to embrace it with open arms and accept it as “legal tender.”
El Salvador president Nayib Bukele is looking to introduce legislation that would recognize the world’s most popular cryptocurrency as “legal tender,” alongside the US dollar, the country’s official currency.
“Next week I will send to Congress a bill that will make bitcoin a legal tender,” said Bukele. According to the President, Bitcoin will make it easier for Salvadorans living abroad to send payments home.
“In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy,” Bukele said at the Bitcoin 2021 conference in Miami on Saturday, adding that it could also boost investment in the country.
Mobile payments app Strike would be joining forces with the government in this initiative, working together to introduce Bitcoin in the country.
Taking to Twitter, Bukele said that if 1% of Bitcoin, which has a market cap of $680 billion, was invested in the country, its GDP would be increased by 25%. It would benefit Bitcoin as well since the cryptocurrency would have 10 million potential new users and provide it the fastest growing way to transfer 6 billion dollars a year in remittances.
Because El Salvador has a cash economy where 70% of the country’s population does not own bank accounts (remittances make up around 20% of the country’s GDP, and more than two million Salvadorans live outside the country but continue to keep sending money back to their country of origin, sending back more than $4billion annually) and work in the informal sector, financial inclusion would not only be a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment, and secure transactions.
“By using bitcoin, the amount received by more than a million low-income families will increase in the equivalent of billions of dollars every year,” he added. It could also improve the country’s low-banking penetration rate.
Unsurprisingly, investors and others associated with the crypto industry are elated at the news, with some hailing it as one of the most significant milestones in the history of Bitcoin.
Jack Mallers, founder of Strike, said that the adoption of the natively digital currency as legal tender provides El Salvador the most secure, efficient and globally integrated open payments network in the world.
“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,” he added.