The president of El Salvador, Nayib Bukele, announced, in a video shown at the Bitcoin 2021 conference, his plans to make Bitcoin a legal tender in his country. With this announcement El Salvador would become the first country in the world to recognize Bitcoin as legal tender.
“Next week I will send to Congress a bill that will make Bitcoin legal tender,” Bukele said, according to conference organizer Bitcoin Magazine.
According to Bukele, El Salvador is partnering with digital finance company Strike to set up logistics and implement Bitcoin as legal tender in his country.
“More than 70% of the working population in El Salvador doesn’t have a bank account. They are not in the financial system,” said Strike CEO Jack Mallers. “They asked me to help them write a plan and that they saw Bitcoin as a world-class currency and that we needed to come up with a Bitcoin plan to help these people.”
According to Bukele, Bitcoin has a market capitalization of $680 billion, investing just 1% of this capitalization in El Salvador could increase its gross domestic product (GDP) by 25%.
Bukele sees Bitcoin as an alternative to integrate thousands of Salvadoran families – who today have no access to the financial sector or the formal economy – and generate an additional source of income that could translate into billions of dollars.
The Salvadoran president also argued that “financial inclusion is not only a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment and secure transactions.”
El Salvador has brought together diverse Bitcoin leaders from around the world to help build a new financial ecosystem with the cryptocurrency. “It was inevitable, but here already: the first country on its way to making Bitcoin legal tender. Another milestone for Bitcoin and El Salvador. We are pleased to help El Salvador on its journey towards adoption of the Bitcoin Standard,” stated Adam Back, CEO of Blockstream, who plans to contribute liquid and satellite infrastructure technologies to Bukele’s initiative.
Strike’s mobile payments app has been operating in El Salvador since March and has quickly become the most downloaded app in the country. Strike’s vision is to create a more connected financial world with greater access for the entire population through the creation of a Bitcoin-based infrastructure.
The announcement of Bitcoin as legal tender in El Salvador didn’t trigger the markets
Despite Bukele’s revelation, the Bitcoin price remained practically unchanged during the day of the announcement; in fact the cryptocurrency closed 3.5 % below its price earlier in the day.
The lack of excitement in the cryptocurrency markets over Bukele’s announcement may be related to the Strike app, which has been accused of being unreliable, meaning that the implementation of Bitcoin will not be free of regulations and intervention from the Salvadoran government.
The other reason may be that El Salvador’s economy is too small to generate any noticeable market impact if Bitcoin is adopted as legal tender. The content of Bukele’s proposal is not yet known, making the announcement extremely vague for investors.