Update 09/06/2021: It's official: El Salvador has become the first country in the world to officially adopt bitcoin as legal tender after Congress approved President Nayib Bukele’s groundbreaking bill. President Nayib tweeted on Wednesday, June 9: "The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress. 62 out of 84 votes! History!"
El Salvador is set to make a world-first move by making bitcoin a legal tender in the country alongside the US dollar.
Nayib Bukele, the 39-year-old President of El Salvador, set out the vision in a string of tweets on Sunday, June 6. To further underline his plan, he even jumped on board with a popular meme among Bitcoin advocates by adding red laser eyes over his Twitter profile picture.
The legislation, which is set to be sent to Congress next week, was drawn up with the help of Strike, a digital payments app set up in El Salvador. They say they provided "market assistance" to help draft the legalization and will continue to work with the country to build a financial infrastructure using Bitcoin technology.
"Central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador," the bill reads, according to a video by Strike CEO and founder Jack Mallers (below). "That in order to mitigate the negative impact from central banks, it becomes necessary to authorize the circulation of a digital currency with a supply that cannot be controlled by any central bank and is only altered in accord with objective and calculable criteria."
Another major drive behind the decision is to make it easier for Salvadorans living abroad to send payments home. Conventional payment systems mean billions of dollars are lost to "middlemen" when people send remittances from abroad. The system is also slow and can take a significant amount of time to complete a transaction. By comparison, the use of bitcoin will allow the instant transfer of money across borders without any charges.
“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,” Bukele tweeted.
President Bukele also pointed out that 70 percent of El Salvador’s population doesn’t have a bank account and works in the "informal economy," meaning they’re currently excluded from many facets of the financial system. This move, he suggests, would help open up more economic potential for these people by giving them easier 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,” he added.
Paraguay also hinted that it might soon be taking similar action. Carlos “Carlitos” Rejala, a politician in Pauaragay, also added glowing red lasers to the eyes in his profile picture and tweeted: “This week we start with an important project to innovate Paraguay in front of the world! El verdadero to the Moon! #btc & #paypal.”
However, many are still uncertain how this proposed system in El Salvador might actually work and some are uneasy about what it may entail.
"Bitcoin is not prohibited in El Salvador and many people already use it, as well as all over the world, and the world's GDP has not risen by 25%," Manuel Hinds, El Salvador's former finance minister, and World Bank consultant, wrote in an editorial for ElSalvadorian.com. Hinds also raised concerns about the system being used for money laundering and the volatility of the bitcoin market.
Some have also doubted whether the move will bring any meaningful prosperity to the country. The media outlet also ran a cartoon of two men standing in a garbage tip, with one saying to the other: “They want to legalize bitcoin as legal tender.” The other replies: “Wow! So how many bitcoins will I get for this bag of plastic bottles?”