World leaders have expressed varying degrees of fascination, hostility, and befuddlement towards cryptocurrency and its often volatile nature. But El Salvador’s President Nayib Bukele just submitted the ultimate vote of confidence.
On Saturday, President Bukele said he will introduce a bill this week to make his country the first to adopt Bitcoin as legal tender.
It’s a Shoo-In
Bukele’s New Ideas party has a strong majority in El Salvador’s Legislative Assembly – so passing his Bitcoin bill should be a relative breeze.
What makes cryptocurrency especially appealing to El Salvador’s developing economy is, unlike cash holdings, it doesn’t require a bank account. So digital wallets can boost financial flexibility in poorer communities without a BancoAgrícola branch on every corner.
- El Salvador, which uses the U.S. Dollar as its currency, is a mostly cash economy. About 70% of people have no bank account or credit card. Remittances, or money sent home by people who emigrated to other nations, accounts for over 20% of GDP.
- But El Salvador also has one of the highest mobile penetration rates in all of Central and South America: there’s 147 mobile cellular subscriptions for every 100 people, and two thirds of the country is on social media.
In other words, it’s a population primed for digital money.
While it’s unclear how Bitcoin would be phased into El Salvador’s economy, the government recruited a team of crypto movers and shakers to help mold a new financial ecosystem, with Bitcoin as the bedrock.
“What’s transformative here is that Bitcoin is both the greatest reserve asset ever created and a superior monetary network,” says Jack Mallers, founder of payments platform Strike and one of those movers and shakers. “Holding Bitcoin provides a way to protect developing economies from potential shocks of fiat currency inflation.”
America Second: The U.S. will soon have a bit more clarity on its own crypto future: the Federal Reserve said it will publish a paper this summer laying out the benefits and risks of a digital U.S. Dollar.