El Salvador has become the first country in the world to adopt bitcoin as legal tender after its congress approved President Nayib Bukele’s proposal to adopt cryptocurrency in an attempt to promote “financial inclusion”, investment and economic development.
Bukele, a media savvy former mayor of the capital San Salvador who was elected president in a landslide victory two years ago, is known for his love of technology and his fondness for attention-grabbing stunts.
Despite concerns that the measure could complicate talks with the IMF, where El Salvador seeks a financing program worth more than $ 1 billion, Congress approved the proposal Tuesday night with 62 of the 84 assembly votes. The congress is controlled by the president’s party and its allies.
The use of cryptocurrency as legal tender, along with the US dollar, will take effect in 90 days and the market will set the bitcoin / dollar exchange rate. Salvadorans will be able to pay their taxes in bitcoin and “every economic agent” must accept the cryptocurrency as payment unless they do not have access to the necessary technology, in which case they will be exempt.
According to the decree presented to Congress, the new law “will regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private individuals or legal entities require to carry out.”
Bukele, 39, had announced the move in a recorded message that was played at a Bitcoin conference in Miami on Saturday.
“Next week I will send a bill to Congress that will make Bitcoin legal tender in El Salvador.” Bukele said. “In the short term, this will create jobs and help provide financial inclusion to thousands of people outside of the formal economy, and in the medium and long term we hope that this small decision can help us push humanity at least a little bit in the future. correct address. “
Bukele has suggested that bitcoin could make it easier for Salvadorans living abroad to send home remittances that amounted to $ 6 billion in 2019, a fifth of the country’s GDP.
The president, who said that the new law “will bring financial inclusion, investment, tourism, innovation and economic development for our country,” had previously added. the “laser eyes” in favor of cryptocurrency to its Twitter profile picture.
His enthusiasm, however, is not universally shared.
Carlos Carcah, a professor at El Salvador’s Higher School of Economics and Business, noted that bitcoin is extremely volatile, meaning that investors “run the risk of getting rich and poor the next day.” But Carcah added that while the adoption of cryptocurrency “was not necessary or convenient … as long as there is someone who accepts payment with bitcoin, as well as accepts dollars, there would be no problems.”
Although Bukele says that around 70% of people in El Salvador lack access to traditional financial services, the use of cryptocurrency for remittances globally is patchy. Converting local currencies to and from bitcoin often relies on informal brokers, prices are volatile, and buying and selling is a complex process that requires technical knowledge.
Opposition lawmaker Rodrigo Ávila, from the conservative Arena party, complained that the legislation had not been sufficiently discussed by the legislature before its approval.
Analysts said the Central American country’s experiment would be closely followed elsewhere.
“The market will now focus on adoption through El Salvador and whether other nations will follow,” said Richard Galvin of crypto fund Digital Asset Capital Management. “This could be a key catalyst for bitcoin for the next two to three years.”
Bukele made headlines around the world in February last year when he marched soldiers in combat uniforms to Congress and told MPs to approve a loan for new security equipment or to reconvene in seven days for another session. .
The president’s concentration of power, attacks on criticism, and open disdain for the controls on his power have raised concerns about El Salvador’s path. However, it has a broad base of support thanks, in part, to the failure of the country’s traditional parties that ruled for the past 30 years to improve people’s lives and their ability to provide short-term benefits.