- El Salvador’s President Bukele announced their country to accept BTC as a legal tender.
- Once the legislation is passed, BTC would transform into a legitimized form of currency.
- It’s difficult to predict the long-term effects of a decentralized technology.
On Saturday, June 5th, El Salvador’s President Nayib Bukele announced that this country will be the first in the world to accept Bitcoin as legal tender. President Bukele made the announcement via broadcast to thousands of attendees at this past weekend’s 2021 Bitcoin conference held in Miami, Florida.
He said that he will send a bill to the Salvadorian congress to initiate the process this week. This marks a significant milestone for the oldest cryptocurrency.
Once the legislation is passed, Bitcoin would transform from a novel digital payment method into a legitimized form of currency that – by the very definition of “legal tender” – would have to be accepted for the payment of debt within that country.
The Salvadorian leader went into more detail about the initiative in a series of tweets to his more than 2.5 million followers on Twitter.
Furthermore, 70% of El Salvador’s population doesn’t have a bank account and work in the informal economy.— Nayib Bukele 🇸🇻 (@nayibbukele) June 6, 2021
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.
We hope that this decision will be just the beginning in providing a space where some of the leading innovators can reimagine the future of finance, potentially helping billions around the world.— Nayib Bukele 🇸🇻 (@nayibbukele) June 6, 2021
He went on to say that El Salvador has assembled Bitcoin leaders across the world to help build a new financial ecosystem with Bitcoin as the base layer. Specifically, President Bukele said the country has entered a strategic collaboration with digital wallet company, Strike, to build modern financial infrastructure using bitcoin technology.
In a company press release announcing the deal, Strike Founder and CEO Jack Mallers, stated that his company has been providing market insights to help make El Salvador’s visionary intentions “…successful and build the country’s modern financial infrastructure using Bitcoin technology. This technology delivers powerful advantages over legacy financial rails and incumbent payment systems.”
Further, speaking from the main stage at Bitcoin 2021, Mallers added, “This is the shot heard ’round the world for Bitcoin. What’s transformative here is that bitcoin is both the greatest reserve asset ever created and a superior monetary network. Holding bitcoin provides a way to protect developing economies from potential shocks of fiat currency inflation. Additionally, adopting a natively digital currency as legal tender provides El Salvador the most secure, efficient and globally integrated open payments network in the world.”
According to the company, making bitcoin legal tender is a transformative moment that can help countries like El Salvador shift from a largely cash economy to an innovative, inclusive, and transparent digital economy where a person’s phone is their bank. This could be a catalyst toward financial equality within a country where roughly 70% of its residents do not have bank accounts or credit cards.
On the Flipside
- While this appears to be a positive development in the short-term for Bitcoin and the entire crypto space, it’s difficult to predict the long-term effects and unintended consequences of a decentralized technology such as Bitcoin being designated as a country’s centralized currency.