MIAMI, Florida — El Salvador is considering legislation that would make it the first sovereign nation in the world to accept bitcoin as legal cash alongside the US currency.
In a video broadcast to Bitcoin 2021, the largest bitcoin event in history, President Nayib Bukele announced El Salvador's collaboration with digital wallet company Strike to build the country's modern financial infrastructure using bitcoin technology.
“Next week, I intend to introduce legislation in Congress to make bitcoin legal tender.,” Bukele stated.
The “shot heard 'round the world for bitcoin,” according to Jack Mallers, founder of the Lightning Network payments platform Strike.
“What makes bitcoin so revolutionary is that it is both the largest reserve asset and the most advanced monetary network. “By holding bitcoin, underdeveloped countries are protected from the potential shocks of fiat currency inflation,” Mallers concluded.
Mallers said the decision will help unlock the power and potential of bitcoin for everyday use cases on an open network that benefits individuals, businesses, and government services, speaking from the mainstage.
El Salvador is mostly a cash economy, with around 70% of the population lacking bank accounts or credit cards. Remittances, or money sent back to El Salvador by migrants, contribute for more than 20% of the country's GDP. For those foreign transfers, which might take days to arrive and occasionally involve a physical pick-up, incumbent providers can charge 10% or more in fees.
While the specifics of how the rollout would work are still being ironed out, CNBC has discovered that El Salvador has enlisted the help of a group of bitcoin leaders to help with the construction of a new financial ecosystem based on bitcoin.
Because Bukele's New Ideas party controls the country's Legislative Assembly, the bill is quite likely to succeed.
“It was bound to happen,” Blockstream CEO Adam Back said, “but here we are: the first country on the verge of making bitcoin legal tender.”
Back stated that he intends to offer technology such as Liquid and satellite infrastructure in order to make El Salvador a global model.
“We are ecstatic to support El Salvador's adoption of the Bitcoin Standard,” he said.
El Salvador is not the country's first foray into the world of bitcoin. Strike launched its mobile payments app in March, and it quickly became the most downloaded software in the country.
Bukele has a sizable fan base, and his populist New Ideas party recently received a landslide of votes. The new assembly, on the other hand, has recently been chastised for dismissing the attorney general and top judges. As a result of the move, the US Agency for International Development withdrew funds from El Salvador's national police and a public information institute, redirecting funds to civil society organisations.