Bitcoin becomes legal tender El Salvador Matters

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In 21 days, El Salvador will officially become the first country in the world to adopt bitcoin as legal tender. Even though this is only a small country with a small gross domestic product (GDP), the first step is still the hardest to take, and a domino effect could bring bigger players to the game in the years. future. After hyperbitcoinization, this will have been, with hindsight, the turning point.

As a blog post aptly puts it, “a domino effect is a beautiful representation of the social, economic and geopolitical events occurring one after the other.” El Salvador is the first domino, and many more are likely to come. Once considered only a far-fetched reality, the fact that a country recognizes bitcoin for what it is, a currency, is closer than ever. And that could turn out to be the little push that others needed.

It all started in January 2021, when bitcoin started to become the norm on the coast of El Salvador. Bitcoin Beach, a local nonprofit, created a circular bitcoin economy for two coastal villages where no banking alternatives existed. The nonprofit started to gain traction with donations from a local and anonymous philanthropic bitcoin whale and established a shadow economy using BTC to solve real problems.

Access to traditional financial services is limited in El Salvador because more than 70% of the population does not have a bank account. This reality led Jack Mallers, founder of the Lightning Network Strike payment app, to launch the then-only American app in the Central American country in March.

“Launching in El Salvador as the first market outside of the United States was a strategic decision,” Mallers said. “No other fintech company can get into and operate in a market like this. This is only possible because Strike is built on Bitcoin, the world’s first open money network. Our success in El Salvador is replicable to billions of people who do not have access to it. to developed financial services.

In April, Bitcoin was already helping El Salvador fund its national surf team and plan a training center, while Salvadoran male and female surf teams signed their very first paid contracts – funded by Bitcoin Beach. But what started as a movement to help strengthen the Bitcoin Beach program quickly gained traction. Mallers said in an episode of the “What Bitcoin Did” podcast that the President of El Salvador, Nayib Bukele, indirectly invited him to a meeting, which led Bukele to send a bill to Congress in June to do so. of bitcoin a legal tender. The law was not approved until a few days later.

The new law will come into force on September 7, officially making bitcoin legal tender in El Salvador. While it allows its citizens to live under a bitcoin standard, regulation can bring many benefits, both domestically and internationally.

The Bank of America (BofA) said cross-border remittances, which account for 24% of El Salvador’s GDP, could benefit from the use of bitcoin. Peer-to-peer electronic money “could potentially reduce transaction costs compared to traditional transfer channels,” BofA said. Recipients could receive a larger share of inbound flows, “increasing their disposable income and reducing the proportion of remittances lost to financial intermediaries.”

Additionally, with a clear regulatory framework for bitcoin, El Salvador is uniquely positioned to attract bitcoin companies from around the world. Small steps in this direction are already turning Wyoming and Miami into Bitcoin hubs, so full Bitcoin clarity will be a distinctive advantage for El Salvador. Miners, in particular, might find this Central American country a great place to start a business, as El Salvador is also home to abundant, cheap, and clean energy. The country’s volcanoes offer BTC miners a unique opportunity – and Bukele has already urged them to take advantage.

Another potential benefit for El Salvador in adopting bitcoin as a currency relates to tourism. Having adopted a stateless currency, the country will attract citizens of the world to visit or even live there. The combination of beautiful beaches and friendly regulations and taxes could be enough to bring many Bitcoiners to the small territory, further developing and nurturing the local economy.

Globally, however, El Salvador is also taking significant steps. The small country could be the first coin to fall into a larger global domino effect of countries rushing to adopt bitcoin and add it to their reserves. After hyperbitcoinization, we’ll likely revisit September 7, 2021, as the day that triggered the most significant set of changes the world has ever seen – gradually, then suddenly.

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