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El Salvador’s adoption of bitcoin would not end the dollarization of the Central American economy, senior government officials said, responding to concerns voiced by confused citizens about the plan.
“The dollar will continue to be the legal tender in El Salvador. Transactions can be done with bitcoin obviously linked to its dollar value. Miguel Kattn, Salvadoran Secretary of Trade and Investment, said Monday in an address covered by local newspaper El Mundo.
Offering the most in-depth review to date of President Nayib Bukeles’ plan to grant legal tender status to bitcoin, Kattan said the bill still under wraps would create an opt-in bitcoin economy where the dollar, official fiat of El Salvador since 2001, remains supreme. .
Kattn explained at a Central Bank press conference, the first to respond to Bukeles’ surprise announcement on Saturday televised at the Bitcoin 2021 conference in Miami, that the goods will remain denominated in dollars in El Salvador. A tomato that costs 20 cents, for example, will still cost 20 cents, even from sellers who accept bitcoin.
He sought to reassure Salvadorans fearing a complete pivot towards a bitcoin standard. Radical social media predictions of an economy where products are priced in satoshis will never come true, he said.
The possibility of such a future had created pockets of confusion on social media, according to local journalist Jos A. Barrera.
Until Saturday, very few people knew about cryptocurrencies in El Salvador, he said in Spanish during a series of Twitter direct messages with CoinDesk. Let’s say it’s not a popular topic. But he started consuming Salvadorians’ online discourse almost immediately.
In social networks and chats, people associate or think they [would] must have bitcoins once the bill becomes law.
The gap between the price of bitcoin (over $ 30,000) and their country’s minimum wage of less than $ 300 per month only added to the confusion, he said. (Bitcoin is divisible to eighth decimal places, making it possible to buy a fraction of a coin, but this is not always obvious to people unfamiliar with cryptocurrency.)
For this reason, Barrera said, it is no coincidence that the government’s first official word on Bukeles’ surprise announcement includes a promise that bitcoin will not replace the dollar.
Nayib Bukele, now President of El Salvador, pictured in 2016 when he was mayor of San Salvador. (Creative Commons)
What the law will say, at the end of the day, is that you can pay if the person who bills accepts Bitcoin and if the person who pays wants to pay using Bitcoin, Kattn said at the press conference.
Despite this, Kattn said the bill would recognize bitcoin as legal tender in El Salvador. The bill would also include protections against money laundering, he said.
Kattn said bitcoin offers El Salvador an opportunity for growth. He highlighted the success of a community known as Bitcoin Beach where hotels, shops, restaurants, and even the water utility accept bitcoin on the Lightning Network at low cost.
There is no difference with what we have today, Kattan said. For consumers and traders, their relationship will always be with the dollar.
Barrera said bitcoin is likely viable in El Salvador, as many residents are already connected to the digital economy.
But we will have to wait to know what will be the conditions of the bill, which will surely pass as proposed by Nayib Bukele ”, he declared.
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