By Jasper Hamill
In June 2021, El Salvador became the first country on the planet to make Bitcoin legal tender.
President Nayib Bukele stunned the world by announcing that he plans to pass a bill that will see the Central American country formally adopt the cryptocurrency.
He went on to promise that crypto entrepreneurs will be offered citizenship and will not have to pay capital gains on Bitcoin, describing El Salvador as the “Land of the Free”.
“I will send to Congress a bill that will make Bitcoin a legal tender in El Salvador,” Bukele told a Bitcoin conference. “In the short term this will generate jobs and help provide financial inclusion to thousands outside the formal economy and in the medium and long term we hope that this small decision can help us push humanity at least a tiny bit into the right direction.”
President Bukele is so extremely online that his Twitter thumbnail shows him with the famous laser eyes typically found on memelords rather than heads of state. But there’s a serious edge to his policies.
Roughly one-quarter of El Salvador’s population lives in the US, where they send back vast amounts of remittances. It’s been estimated that these payments make up 20% of the country’s gross domestic product (GDP), with $4bn sent back every year.
Sending remittances using crypto could slash the cost dramatically, reducing fees by more than half.
In a country where people rely on these cross border payments to feed their families and send their kids to school, any reduction in fees offers a clear benefit.
On Twitter, President Bukele published a thread that spelled out further implications of his plans.
“Bitcoin has a market cap of $680 billion dollars,” he wrote.
“If 1% of it is invested in El Salvador, that would increase our GDP by 25%. On the other side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances.”
“Besides, 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.”
Some 70% of El Salvador’s population is unbanked, meaning they don’t have a bank account and work in the informal economy.
“Financial inclusion is not only a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment and secure transactions,” Bukele added.
“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.”
El Salvador is currently dependent on fossil fuels for most of its electricity power, yet is currently moving to renewables to cut its reliance on imported energy. If this transition is successful, it could build a green crypto sector powered by renewables within the next five years.
The crypto community was very excited about the news.
On Reddit, one user wrote:
“I think we all know what countries have gang violence and high crime rate by doing a little google searching. There has been enough discussion about that stuff in this particular thread. The point of bitcoin and cryptocurrencies in general is to allow for one’s own economic prosperity and to create (at least for Bitcoin) an undebasable and non-manipulatable asset. I am also willing to wager that this move from Nayib Bukele may be a factor that reduces future violence and crime in El Salvador.”
The Twitter @DocumentingBTC tweeted: “The world may seem dark. But there is a small, orange spark of hope if you look closely enough. That’s all it takes to start a fire. El Salvador and Bitcoin.”
However, despite the online excitement El Salvador is a very small country and the crypto markets appear to be largely unmoved by the announcement.