El Salvador is on track to become the first sovereign nation in the world to adopt bitcoin (BTC) as its official currency, alongside the US dollar, if a new bill passes Congress. The federal government wants to close a partnership with the cryptocurrency company Strike to build a digital financial infrastructure for the entire Central American country.
The announcement was made during the Bitcoin 2021 conference, which took place this weekend in Miami and was billed as the biggest cryptocurrency event in history. In a video broadcast, El Salvador’s President Nayib Bukele announced his plans to digitize the economy: “Next week, I will send Congress a bill that will make bitcoin an official currency.”
Jack Mallers, founder of the Lightning Network Strike payment platform, said the partnership will have a huge impact across the entire cryptocurrency universe. “What is transformative in this proposal is that bitcoin is the largest reserve asset ever created and its monetary network is superior. Keeping digital currency for long periods is a way to protect developing economies from potential fiat currency inflation shocks,” he continued.
The executive also said the move would help unlock the potential that bitcoin can have in everyday use, such as in small transactions, creating an open and transparent financial network that would benefit Salvadoran citizens, businesses and public sector services.
Bitcoin would facilitate international transactions in El Salvador
El Salvador is considered an economy in which the use of physical money in daily transactions still predominates, where around 70% of people do not have bank accounts or credit cards. In addition, approximately 20% of GDP is made up of remittances that migrants send back to the country.
Historically, this important amount transacted internationally can be taxed up to 10% by banking services and take several days to reach El Salvador. In some cases, the recipient even has to physically collect the shipment.
In this sense, the officialization of bitcoin would be extremely beneficial for international transactions, being a decentralized cryptocurrency that charges a fee of around US$ 5 per transaction. However, there are also challenges that its price volatility poses for its daily use. This year alone, the asset has more than doubled in value and reached the current record of $64,000, but it is currently traded for $35,000.
government studies digital financial system
President Bukele didn’t give much details about how bitcoin will be implemented in the Salvadoran economy, but it is known that a team of crypto industry leaders has been created in the country to help build a new financial ecosystem with digital currency in its base currency.
The president’s “New Ideas” party currently has control over the country’s Legislative Assembly, so passing the bill is very likely. Adam Back, CEO of crypto company Blockstream, told CNBC which plans to contribute satellite technologies and infrastructure to make El Salvador a financial model for the world.
The Central American country was already giving several signs of support for bitcoin and cryptocurrencies in general. In March, Strike launched a payments app in El Salvador and it quickly became the number one download in the region.
With information: Washington Post, CNBC