El Salvador’s Embracing Bitcoin Paves The Way For Global Adoption
By Dion Guillaume
On Saturday, El Salvador’s president, Nayib Bukele, announced that El Salvador would declare Bitcoin as legal tender in the country and open its arms to cryptocurrency companies in the coming months. During a parliamentary meeting earlier this week the vote passed with a super majority.
Background
The Spanish speaking country is the smallest in Central America and is known for its world famous coffee, spectacular surfing beaches and abundance of volcanoes. Interestingly over 70% of the population doesn’t have a bank account, however it has one of the highest mobile penetration rates in the world with 125 out of every 100 people owning a mobile phone. El Salvador means “the saviour” in Spanish, which some die-hard Bitcoiners are likely to dub the country.
Announcement
President Nayib Bukele, together with Strike’s Jack Mallers, used the Bitcoin 2021 Miami conference to announce that El Salvador would allow Bitcoin as legal tender. “Next week I will send to congress a bill that will make bitcoin a legal tender,” Bukele said. “Over 70% of the active population of El Salvador doesn’t have a bank account. They’re not in the financial system,” said Jack Mallers, CEO of Strike. “They asked me to help write a plan and that they viewed bitcoin as a world-class currency and that we needed to put together a Bitcoin plan to help these people.” Subsequently, the bill was passed with a supermajority earlier this week.
Bitcoin As Legal Tender
El Salvador will become the first country in the world to openly embrace Bitcoin as legal tender and push through favourable regulation to welcome companies that focus on cryptocurrencies. Citizens in the country would be able to pay for goods and services using Bitcoin, beside the US Dollar which is currently widely used in the country. El Salvador currently holds over $2.5 billion in foreign currency reserves and it remains unclear whether or not the country will convert some of its assets into Bitcoin.
Embracing Bitcoin
The country is the first in the world to welcome Bitcoin with open arms and will likely act as a ‘guinea pig’ for other nations to see the effect of Bitcoin adoption. El Salvador has first mover advantage and is likely to see a lot of cryptocurrency companies set up offices in the nation, with Justin Sun, founder of Tron, eager to be the first to do so. What is interesting however is how exactly Bitcoin will be used, in all likelihood it will be mobile-first with a partnership with Strike bringing the infrastructure needed to accommodate a national roll out.
Due to the US government’s insistence on printing more Dollars, it’s only a matter of time before the Dollar starts facing some difficulties and devaluation. Countries, especially developing nations, that are reliant on the Dollar for international trade and investment, will suffer the most. By embracing Bitcoin as a hedge against inflation alone, countries are likely to benefit greatly, but El Salvador is essentially fully integrating Bitcoin into their economy, which is unprecedented and may benefit the country for decades to come.
Earlier this week, a Paraguayan government official tweeted that the country should not be left behind, signalling interest by more countries, especially in Central America, to follow in El Salvador’s footsteps. As citizens of most emerging markets are mobile-only, El Salvador will pave the way for the development of the infrastructure needed to bring crypto to more countries. Mobile money is big in Africa as the masses remain unbanked and telecoms infrastructure seems more reliable than the financial institutions in these countries.
Bitcoin As An Asset
For centuries, gold has been seen as a token of wealth for nations across the globe, but as evident in the last decade alone, Bitcoin is the new gold. Over the last decade Bitcoin has far outperformed gold as an asset and it is likely to continue for the foreseeable future. By embracing ‘digital gold’, countries are safeguarding future generations against hyperinflation, a huge problem for many emerging markets in recent years. The first country to embrace Bitcoin will likely reap the most rewards, in this case it would seem the future is bright for El Salvador and its citizens.
Individuals holding 3 BTC or more would be able to gain citizenship in the country. Yesterday, Bukele announced that the country would use excess geothermal energy generated from the nation’s volcanoes to create a 100% clean Bitcoin mining operation, ensuring the nation is able to generate a sizable holding without having to purchase Bitcoin on open markets.
This article has also been published on dailyhodl.com
https://dailyhodl.com/2021/06/14/el-salvadors-embracing-bitcoin-paves-the-way-for-global-adoption/
