El Salvador is looking to introduce legislation that will make it the world’s first sovereign nation to adopt bitcoin as legal tender, alongside the U.S. dollar.
In a video broadcast to Bitcoin 2021, a multiday conference in Miami being billed as the biggest bitcoin event in history, President Nayib Bukele announced El Salvador’s partnership with digital wallet company, Strike, to build the country’s modern financial infrastructure using bitcoin technology.
Jack Mallers, founder of the Lightning Network payments platform Strike, stated that holding bitcoin provides a way to protect developing economies from potential shocks of fiat currency inflation. He further stated that the move will help unleash the power and potential of bitcoin for everyday use cases on an open network that benefits individuals, businesses, and public sector services.
El Salvador is a largely cash economy, where roughly 70% of people do not have bank accounts or credit cards. Remittances, or the money sent home by migrants, account for more than 20% of El Salvador’s gross domestic product. Incumbent services can charge 10% or more in fees for those international transfers, which can sometimes take days to arrive and that sometimes require a physical pick-up.
Bitcoin isn’t backed by an asset, nor does it have the full faith and backing of any one government. Its value is derived, in part, from the fact that it is digitally scarce; there will only ever be 21 million bitcoin in existence.
While details are still forthcoming about how the rollout will work, it is said that El Salvador has assembled a team of bitcoin leaders to help build a new financial ecosystem with bitcoin as the base layer.
Adam Back, CEO of Blockstream, said he plans to contribute technologies like Liquid and satellite infrastructure to make El Salvador a model for the world.
This isn’t El Salvador’s first move into bitcoin. In March, Strike launched its mobile payments app there, and it quickly became the number one downloaded app in the country.
Bukele has been very popular, with his populist New Ideas party sweeping recent elections. This party has control over the country’s Legislative Assembly, therefore passage of the bill is very likely.
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