El Salvador Set to Make Bitcoin Legal Tender

A step to provide financial inclusivity in a country where more than 70% of the population does not have bank accounts and remittances make for 20% of the GDP

El Salvador, the smallest country in Central America, announced on June 5th, 2021 its intention to make bitcoin legal tender. If they do so, El Salvador will become the very first country in the world to adopt bitcoin as a legal digital currency.

The announcement was made at the Bitcoin conference in Miami. Jack Mallers, the CEO of Strike (bitcoin payment app most widely downloaded in El Salvador) made the announcement and was confirmed by Nayib Bukele, president of El Salvador via video broadcast.

Nayib Bukele 🇸🇻 @nayibbukele

Welcome to the future 🇸🇻 #Bitcoin

Jack Mallers been on the ground in El Salvador helping the president of the country write the bill and a plan to make El Salvador a bitcoin country. In an emotional speech, Mallers makes the case for bitcoin leading to financial inclusivity of all El Salvadorans.

About 70% of El Salvador’s population does not have bank accounts or credit cards. In addition, remittances account for more than 20% of El Salvador’s GDP, and incumbent services can charge 10% or more in fees for international transfers that take days to arrive and must be collected from a physical location. That amounts to hundreds of millions of dollars a year that people could save or spend with local businesses in their communities.

Nayib Bukele 🇸🇻 @nayibbukele

#Bitcoin has a market cap of $680 billion dollars. If 1% of it is invested in El Salvador, that would increase our GDP by 25%. On the other side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances.

Nayib Bukele 🇸🇻 @nayibbukele

Besides, a big chunk of those 6 billion dollars is lost to intermediaries. By using #Bitcoin, the amount received by more than a million low income families will increase in the equivalent of billions of dollars every year. This will improve lives and the future of millions.

Nayib Bukele 🇸🇻 @nayibbukele

Furthermore, 70% of El Salvador’s population doesn’t have a bank account and work in the informal economy. 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.

By adopting bitcoin as legal currency, the country is declaring freedom from central banks, intermediaries and their exorbitant fees.

This is a massive announcement not just for bitcoin and El Salvador but also for other developing countries to take cue, specially the ones with weak currencies and that rely heavily on remittances. Making bitcoin a legal tender means the population can now participate in a world currency. People can now officially save and invest in bitcoin. El Salvadorans abroad can send money back in bitcoin without having to pay high fees. The vast majority of Salvadoran migrants, almost 2 million, work in the United States and at the end of 2020 they sent a record high of  $5.92 billion. 

And one day and maybe soon enough with bitcoin’s lightning network they’ll even be able to transact for everyday goods in bitcoin.

Jack Mallers at Bitcoin 2021 showing an excerpt of El Salvador’s Bill

El Salvador’s current currency is USD by adopting bitcoin the country aims to project itself into a new tech optimistic future.