El Salvador became the first country in the world to adopt bitcoin as legal tender.
The plan announced by President Nayib Bukele would make the small Central American nation the first in the world to adopt the digital currency, Bitcoin, as legal tender alongside the dollar.
It would be a unique and bold step, the first by a sovereign country, and that may well be part of the attraction for Mr Bukele, a young, media-savvy and very popular leader who worries Washington over his increasingly autocratic tendencies.
There are still many questions over how the digital currency would become the country’s legal tender – a major overhaul of El Salvador’s financial infrastructure would be needed with Bitcoin at its heart.
But, in essence, it appears that is what Mr Bukele is proposing.
Much of El Salvador’s developing economy is based on remittances from abroad and the move to a digital currency may allow family members to avoid the costly fees involved in sending money home each month.
Either way, it is a move which is likely to bolster Bitcoin’s image as the “currency of the future” and President Bukele’s standing among his supporters as an innovator.
Bukele, a 39-year-old, right-wing populist who rose to power in 2019, has a strong majority of 56 out of 84 seats since a landslide victory in legislative elections last March. That means passage of the bill is likely.
Bukele said El Salvador partnered with digital finance company Strike to establish the logistics of the decision.”Over 70% of the active population of El Salvador doesn’t have a bank account. They’re not in the financial system,” Strike CEO Jack Mallers said. “They asked me to help write a plan and that they viewed bitcoin as a world-class currency and that we needed to put together a bitcoin plan to help these people.”El Salvador currently uses the United States Dollar as its official currency.
according to Cryptonews Bukele said that he wanted the country’s citizens to think about money in terms of Bitcoin, not dollars. The resolution states that citizens should be able to convert between the two currencies at any time, and that US dollars “will be used as the reference currency” for accounting.
Crypto’s rise in popularity has led the USD dollar printing Federal Reserve to look hard at the old-fashioned dollar’s limitations — particularly around payments and money transfers that can take days to accomplish. Bitcoin transactions happen almost instantaneously. Cryptocurrencies also don’t require a bank account. Instead, they’re held in digital wallets. That could help people in poorer communities — such as many in El Salvador but also in minority communities in the United States and around the World — gain increased access to their finances. Lael Brainard, a member of the U.S Federal Reserve Board of Governors, laid out a case last month for a secure, central bank-backed digital currency that could create a more efficient payment system and expand financial services to Americans who have been underserved by traditional banks.