Why El Salvador sees a future in Bitcoin
A few hours later, El Salvador passed the law and became the first country to adopt Bitcoin as legal tender. Bitcoin, the digital currency that fascinates speculators and serves as an alternative payment system, knows no borders and operates unhindered alongside the traditional dollar-dominated monetary system.
By adopting Bitcoin, Bukele launched a strategy to attract new international capital to the country. It also creates some distance from the dollar’s shadow, setting the stage for potentially thumbing its nose in the United States.
#Bitcoin has a market capitalization of $ 680 billion.
If 1% is invested in El Salvador, it would increase our GDP by 25%.
On another side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer $ 6 billion a year in remittances.
– Nayib Bukele (@nayibbukele) June 6, 2021
â€œEvery restaurant, every barber shop, every bankâ€¦ everything can be paid for in US dollars or Bitcoin and no one can refuse payment,â€ Bukele said on Carter’s audio chat, first reported locally by the Boston Business Journal. At one point, over 20,000 people were listening, including Twitter CEO Jack Dorsey and billionaire entrepreneur Mark Cuban, Carter told me in an interview.
Bitcoin now has the same legal status in El Salvador as the US dollar, which remains the official currency. â€œEven taxes can be paid with Bitcoin … even loans,â€ Bukele said in the chat. Indeed, businesses are now legally required to accept Bitcoin as a means of payment, except those that lack the technology to do so. (The country has already experimented with Bitcoin: over the past year, El Zonte beach, located on the Pacific coast, has turned into a mini Bitcoin economy through the efforts of a non-profit organization.)
That Bukele took to social media to answer questions about Salvadoran domestic politics as this was happening is very about the brand for him. He uses Twitter a lot and eschews traditional media in favor of YouTube influencers. But his recent authoritarian tendencies have sounded the alarm bells by American officials, who could be consider sanctions against Salvadoran government officials. (It is no coincidence that the countries that have bet heavily on cryptocurrency are the ones facing financial sanctions from the United States – Iran and Venezuela.)
â€œNone of us denied [Bukele]â€And its authoritarian policies, Carter said. Bukele stayed chatting for over an hour. Carter admitted he had an unusual opportunity. “It’s crazy for a head of state to engage in an improvised, unplanned and improvised conversation,” he said. â€œI asked him if he was doing this because he wanted to de-dollar El Salvador. What if he did it because he was worried about the inflation of the US dollar? He said no to both, â€Carter told me.
Yet the new policy may be Bukele’s â€œclever populist retaliation against the United States,â€ Carter said. He is right. As Bukele explained in the live chat, the move is also aimed at attracting capital to the country, where remittances from Salvadorans living abroad represent around 23% of GDP. The new policy forces Bitcoin holders – estimated at around 100 million people worldwide, Carter said – to look at El Salvador with fresh eyes. â€œThere’s a lot of crypto capital going around looking for a home,â€ Carter said. These are people who are indifferent to where they live but sensitive to regulation and tax policy, he added.
Bukele’s decision could very well mark the start of a bidding war between nations to attract this volatile wealth, estimated at hundreds of billions of dollars. In fact, other Latin American leaders have expressed interest in opening up to Bitcoin. But it remains to be seen whether Bitcoin will revive the Salvadoran economy or if it is simply a useful tool for Bukele’s power-building agenda.
Marcela GarcÃa can be contacted at email@example.com. Follow her on Twitter @marcela_elisa.