Bitcoin Becomes Legal Currency in El Salvador

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October 7, 2021

El Salvador’s parliament voted to adopt bitcoin as legal tender on June 9. In the near future, the document will be signed by the President of the country Nayib Bukele. 62 members of the legislature voted in favor of the bill, 19 members were against and three – abstentions. The next step is to create the appropriate infrastructure.

The El Salvadorian authorities will have 90 days after the law enters into force. Two days before the adoption of bitcoin as a means of payment in El Salvador, the Panamanian Congressman announced the need for such a step. He called on the Panamanian authorities to support the cryptocurrency so that the country can become a hub for technology and entrepreneurship.


Bitcoin as a way to boost financial inclusion

On Twitter Nayib Bukele provided some more details about the new law. He presented it as an effort to boost financial inclusion in a country. El Salvador has only 30 % of citizens who have access to financial services.

According to the president, there will be no necessity for users to use obligatory a government wallet. In addition, Bukele said that they would grant permanent residence to any individual who invests three BTC in El Salvador’s economy.

The approved law will make all companies to accept bitcoin for goods or services. For those entities who are unwilling to take the risk of a volatile cryptocurrency, the government will act as an endorsement.


No risks for convertibility

The government will establish a trust at the Development Bank of El Salvador. For instance, a merchant is now to accept bitcoin and does not want to take the risk of convertibility. He has two options to follow. It’s possible to change digital money on the market and he can also do that in the bank. The governmental banks will change the currencies immediately.

The Development Bank trust fund would sell part of the bitcoin it receives for dollars to replenish the fund. The government officials of El Salvador are to meet with the International Monetary Fund in the coming days to discuss the plan.


Prospective plans for bitcoin mining

Moreover, Bukele paid attention to the importance of bitcoin mining. The president said that El Salvador had already hoped to attract companies with excess geothermal energy. It is one of those sectors that could benefit for the country. Speaking in general, El Salvador itself does not have any weight for the crypto market. The country does not even have its own national currency. All the operations are made in dollars.

Analytics say that the country has decided to accept bitcoin as a means of payment, as it will help migrants transfer money to their families in El Salvador. The economy of the country is 70% dependent on such monetary transfers from migrants who left to work out of the country.


The influence of the new law on the crypto market

Globally for the crypto market, the decision of the El Salvadorian authorities does not matter. It’s much more important to mind the statements of the authorities of the countries-whales that express their intentions about cryptocurrencies. In any case, it’s great news for crypto followers and it might be the first step for such countries.

The adoption of bitcoin as a means of payment in El Salvador is a historic milestone. It marks the recognition of bitcoin as a tool for transferring value from not just retail or institutional users, but national regulators.

Other countries may follow the example of El Salvador. Especially those who have high dependence on emigrant remittances, hyperinflation of the national currency, economic instability or sanctions restrictions imposed by the United States and Europe.

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