El Salvador has announced that it is planning to make Bitcoin legal tender.
The revelation emerged during the Bitcoin 2021 conference in Miami, and certainly caused a splash.
Nayib Bukele, the president of the Central American nation, appeared on video as the news emerged in a keynote speech on Saturday. He said:
“In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy.”
It’s clear that El Salvador is trying to achieve several things through this announcement.
First, it’s first-mover advantage could bring high levels of investment, and even prompt crypto companies to move.
Second, the proposals could have big benefits for the people of El Salvador, where remittances are a crucial source of income for locals. The fees associated with cross-border transfers can be rather punishing, and Bitcoin could help bring costs down substantially.
The news was revealed by Strike, a digital wallet that’s built on Bitcoin’s Lightning Network, by emotional CEO Jack Mallers. He said:
“Adopting a natively digital currency as legal tender provides El Salvador the most secure, efficient and globally integrated open payments network in the world.”
Whereas announcements about companies adding Bitcoin to their balance sheet tend to cause the cryptocurrency to shoot up, BTC/USD was rather muted — and actually fell in the hours afterward.
Opportunities… and Challenges
Figures cited by the president suggest that 70% of El Salvador’s population does not have a bank account — and Bitcoin could improve access to financial services.
But adoption may prove something of a challenge given how adoption of the internet across the country lags behind other countries.
Allegations of corruption are also common in El Salvador. Last month, the U.S. accused five politicians in El Salvador of “significant acts of corruption.”
And, the day before the announcement was made in Miami, a court sentenced the wife of a former president to 10 years in prison for money laundering — ordering her to repay $17.6 million to the government.