El Salvador’s President Nayib Bukele said on Saturday that he will send a bill to Congress next week to make bitcoin legal tender in the Central American nation.
El Salvador, June 6, 2021 /AlexaBlockchain/ – El Salvador is on its way to become the world’s first country to adopt bitcoin as a legal tender.
El Salvador’s President Nayib Bukele broadcast his intentions on a video at the Bitcoin 2021 conference in Miami. Bukele said on Saturday that he will send a bill to Congress next week to make bitcoin legal tender in the Central American nation, touting its potential to positively impact the country’s GDP and quickly improve the financial well being of the low-income Salvadorans.
President Nayib expects Bitcoin adoption to significantly boost the country’s GDP. He took to twitter and wrote, “Bitcoin has a market cap of $680 billion. If 1% of it is invested in El Salvador, that would increase our GDP by 25%.”
#Bitcoin has a market cap of $680 billion dollars.— Nayib Bukele 🇸🇻 (@nayibbukele) June 6, 2021
If 1% of it is invested in El Salvador, that would increase our GDP by 25%.
On the other side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances.
On the issue of remittances, Bukele said that currently “a big chunk of those 6 billion dollars is lost to intermediaries. 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 pointed out that 70% of El Salvador’s population does not have a bank account and works in the informal economy.
“Financial inclusion is not only a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment and secure transactions,” Bukele said.
Bukele added, “We hope that this decision will be just the beginning in providing a space where some of the leading innovators can reimagine the future of finance, potentially helping billions around the world.”
Making Bitcoin Legal in El Salvador: Why does it matter?
Making bitcoin legal tender is a leapfrog moment that can help countries like El Salvador shift from a largely cash economy to an innovative, inclusive, and transparent digital economy where your bank account is your phone. That is especially meaningful in El Salvador, where about 70% of people do not have bank accounts or credit cards. In addition, remittances account for more than 20% of El Salvador’s GDP, and incumbent services can charge 10% or more in fees for international transfers that take days to arrive and must be collected from a physical location. That amounts to hundreds of millions of dollars a year that people could save or spend with local businesses in their communities – demonstrating the powerful use cases and addressable market opportunities from scaling Bitcoin and the Lightning Network for everyday uses.
Strike Leads the Charge in El Salvador
El Salvador has assembled Bitcoin leaders across the world to help build a new financial ecosystem with Bitcoin as the base layer. Bukele said in the broadcast the country is partnering with digital wallet company, Strike, to build modern financial infrastructure using bitcoin technology.
Strike’s mobile payments app launched in El Salvador in March and quickly became the number one downloaded app in the country.
Strike, a digital wallet built on Bitcoin’s Lightning Network, said in a statement that it welcomed the legislation to make El Salvador the world’s first sovereign nation to adopt bitcoin as legal tender alongside the U.S. dollar.
Strike said that its founder and CEO Jack Mallers has been providing market insights to help make El Salvador’s world-changing effort successful and build the country’s modern financial infrastructure using Bitcoin technology. Strike said in a statement that Bitcoin technology delivers powerful advantages over legacy financial rails and incumbent payment systems.
“This is the shot heard ’round the world for Bitcoin,” Mallers quoted as saying at Bitcoin 2021 conference in Miami.
Mallers said, “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.”
“Adopting a natively digital currency as legal tender provides El Salvador the most secure, efficient and globally integrated open payments network in the world,” Mallers added.
Strike expects to enter several more markets in coming months. Strike said in a statement, “Once governments see the benefits of Bitcoin technologies like Strike on financial efficiency and inclusion, it becomes obvious that they will seek to follow in the footsteps of El Salvador.”
“It was an inevitability, but here already: the first country on track to make bitcoin legal tender. Another milestone for Bitcoin and El Salvador. We’re pleased to help El Salvador on its journey towards adoption of the Bitcoin Standard,” stated Adam Back, CEO of Blockstream, who plans to contribute technologies like Liquid and satellite infrastructure to make El Salvador a model for the world.
El Salvador’s Bitcoin Rollout Plans
Technical details on Bitcoin Rollout in El Salvador are still forthcoming. All we know at the moment that El Salvador has assembled a team of bitcoin leaders to help build a new financial ecosystem with bitcoin as the base layer.
El Salvador Villages Are Already Living In Bitcoin Economy
El Zonte, a small rustic beach town of 3,000 locals on the coast of El Salvador, ushered into Bitcoin economy last year.
An anonymous donor with a fondness for El Zonte made multi-year six figure donation in Bitcoin, which he had originally purchased when it was priced at around 5-10 cents. The secret Bitcoin donation was given to Michael Peterson, a San-Diego native that spends up to 9 months of the year volunteering in El Zonte, on the condition that he would not cash it out. Beneficiaries of the digital currency had to learn how to use the Bitcoin itself, giving birth to the Bitcoin Beach initiative.
Bitcoin Beach set out to create a sustainable Bitcoin ecosystem, where the majority of residents are unbanked and the local businesses don’t meet the requirements that would enable them to accept credit cards.
Michael Peterson developed a proposal for a Bitcoin circular economy which factored in remittances, tourism, public service and small business. Parallel to El Zonte, Bitcoin was also injected into another beach community 3 hours away, Punta Mango. The goal is for Bitcoin adoption to grow in different communities and fill the gaps in over time.
What can you buy with Bitcoin in El Zonte? Currently, you can use the Lightning Network to buy anything from tacos, to hardware supplies to paying your utility bill.