El Salvador seeks to become the first country to adopt bitcoin as legal tender
Nayib Bukele, President of El Salvador, delivers a speech to Congress in the Legislative Assembly building in San Salvador, El Salvador, Tuesday, June 1, 2021. Photographer: Camilo Freedman / Bloomberg via Getty Images
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MIAMI – El Salvador is seeking to introduce legislation that will make it the first sovereign country in the world to adopt bitcoin as legal tender, alongside the US dollar.
In a video broadcast on Bitcoin 2021, a multi-day conference in Miami billed as the largest bitcoin event in history, President Nayib Bukele announced El Salvador’s partnership with digital wallet firm Strike, to build the modern financial infrastructure of the country using bitcoin technology.
“Next week I will send a bill to Congress that will make bitcoin legal tender,” Bukele said.
Jack Mallers, founder of the Lightning Network Strike payment platform, said it would decrease as the “hit heard” around the world for bitcoin.
“What is transformative here is that bitcoin is both the largest reserve asset ever created and a superior monetary network. Holding bitcoin offers a way to protect developing economies against potential shocks from the market. inflation of fiat money, ”Mallers continued.
Speaking from the main stage, Mallers said the move would help unleash the power and potential of bitcoin for everyday use cases on an open network that benefits individuals, businesses and public sector services.
El Salvador is a largely cash economy, where around 70% of the people do not have a bank account or credit card. Remittances, or money sent home by migrants, accounts for more than 20% of El Salvador’s gross domestic product. The services in place may charge a 10% or more fee for these international transfers, which can sometimes take days to arrive and sometimes require physical pick-up.
Bitcoin is not backed by an asset, nor does it have the full trust and support of a single government. Its value is derived, in part, from the fact that it is numerically rare; there will never be more than 21 million bitcoins.
While details are still available on how the deployment will work, CNBC learns that El Salvador has assembled a team of bitcoin leaders to help build a new financial ecosystem with bitcoin as a foundation layer.
Bukele’s New Ideas Party has control over the country’s Legislative Assembly, so passage of the bill is very likely.
“It was inevitable, but already there: the first country on the way to making bitcoin legal,” said Adam Back, CEO of Blockstream.
Back said he plans to contribute technologies such as liquid and satellite infrastructure to make El Salvador a model for the world.
“We are delighted to help El Salvador on its journey towards adopting the Bitcoin standard,” he said.
This is not El Salvador’s first step into bitcoin. In March, Strike launched its mobile payment app there, and it quickly became the first downloaded app in the country.
Bukele has been very popular, with his populist New Ideas party sweeping the last election. However, the new assembly has recently come under fire after ousting the attorney general and top judges. The move prompted the US Agency for International Development to withdraw aid from El Salvador’s National Police and a public information institute, instead of redirecting funds to civil society groups.