El Salvador, the Central American nation will soon accept Bitcoin as a legal tender. President Nayib Bukele announced the move in a recorded message played at the Bitcoin 2021 conference in Miami, Florida last Saturday. The President said he will send the proposed legislation this week to the country’s congress.
The Central American nation does not have its own monetary policy and uses US dollar as a legal tender. New Ideas party, founded by the president holds a supermajority in the congress making any legislative proposal from the president likely to be passed.
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El Salvador is a large cash economy, where roughly 70% of people do not have bank accounts or credit cards. The country largely relies on remittances sent by ex-pats, roughly accounting for more than 22% of El Salvador’s gross domestic product (nearly US 6 billion in remittances annually).
#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.
The move was first announced by Zap’s Jack Mallers followed by a televised address from the president. Mallers said his payment company Strike by Zap, built on Bitcoin’s Lightning Network is working with the president to implement the plan. Strike’s mobile payments app was launched in El Salvador this March and quickly became the number one downloaded app in the country.
“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 said.
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Mallers also read out extracts from the bill which are as follows: “Central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador; That in order to mitigate the negative impact from central banks, it becomes necessary to authorize the circulation of a digital currency with a supply that cannot be controlled by any central bank and is only altered in accord with objective and calculable criteria.”
The announcement is also in contrast to other countries where central banks are planning their own digital currencies, instead of recognizing existing cryptocurrencies as legal tender.