Nayib Bukele, President of El Salvador, gives a speech in Congress at the Legislative Assembly Building in San Salvador, El Salvador, on Tuesday, June 1, 2021. Photographer: Camilo Freedman / Bloomberg via Getty Images
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MIAMI – El Salvador wants to introduce laws that will make it the first sovereign state in the world to adopt bitcoin as a legal tender, along with the US dollar.
In a video broadcast on Bitcoin 2021, a multi-day conference in Miami that is being charged as the biggest bitcoin event in history, President Nayib Bukele announced El Salvador’s partnership with digital wallet company Strike in building the country’s modern financial infrastructure using bitcoin technology.
“Next week, I will send a law to Congress that will make bitcoin a legal tender,” Bukele said.
Jack Mallers, founder of the Lightning Network Strike payment platform, said this would fall while “shooting around bitcoin around the world”.
“What is transformative here is that bitcoin is the largest reserve ever created and a superior monetary network. Holding bitcoin provides a way to protect developing economies from potential shocks to the fiat currency,” Mallers continued.
Speaking from the main stage, Mallers said the move would help unleash the power and potential of bitcoin for cases of everyday use on the open network that benefits individuals, businesses and public sector services.
El Salvador is mostly a cash economy, where approximately 70% of people do not have bank accounts or credit cards. Remittances or money sent home by migrants make up more than 20% of El Salvador’s gross domestic product. Current services may charge 10% or more of fees for those international transfers, which can sometimes take days and sometimes require physical transportation.
Bitcoin does not support assets nor does it have the full faith and support of any government. Its value is derived in part from the fact that it is digitally scarce; there will only be 21 million bitcoins.
Although details are still coming about how the introduction will work, CNBC was told that El Salvador has assembled a team of bitcoin leaders to help build a new financial ecosystem with bitcoin as the base layer.
Bukele’s New Ideas party has control over the country’s legislative assembly, so the adoption of the law is very likely.
“It was an inevitability, but here already: the first country on the road to set up bitcoin as a legal tender,” said Adam Back, CEO of Blockstream.
Back said he plans to contribute to technologies like Liquid and satellite infrastructure to make El Salvador a model for the world.
“We are pleased to be helping El Salvador on its path to adopting Bitcoin standards,” he said.
This is not the first transition of El Salvador to bitcoin. In March, Strike launched its mobile payment app there and quickly became the number one app in the country.
Bukele was very popular, and his populist New Ideas party flooded the recent elections. However, the new assembly has recently come under fire after it ousted the state’s attorney and chief justice. The move prompted the U.S. Agency for International Development to withdraw assistance from the El Salvador National Police and the Institute for Public Information, instead of redirecting funds to civil society groups.