The Salvadoran parliament has just approved a law making bitcoin legal tender for daily transactions. It would compete with the dollar in this country where the greenback dominates the economy.
“The bitcoin law has just been approved by a qualified majority in El Salvador’s Congress,” President Nayib Bukele tweeted on June 9 after the vote, describing as historic this decision which makes this Central American country the first to make bitcoin legal tender.
Tea #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
– Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
In this small country where four in ten people live in poverty, this law is expected to allow bitcoin to be used for many aspects of daily life, from buying real estate to tax matters.
Currently, El Salvador’s main currency is the US dollar, and how the country plans to implement the legal use of bitcoin as a functional currency is not yet clear.
During the Bitcoin 2021 conference held in the American city of Miami on June 4 and 5, the Salvadoran president defended this project in a video message, believing that it would bring the country “financial inclusion, investment, tourism, innovation and economic development ”.
In the dollarized economy of El Salvador, Salvadorians’ remittances from abroad constitute a significant support and equivalent to 22% of the gross domestic product (GDP). With the legalization of bitcoin, money transfers from the diaspora would avoid exchange fees, commissions, etc.
For the 39-year-old leader, bitcoin represents “the fastest way to transfer” those billions of dollars in remittances and to prevent “millions of dollars” from being captured by intermediaries. “This law will make El Salvador more visible in the world, we will be more attractive for foreign investment,” said Romeo Auerbach, who belongs to the party of the Great Alliance for National Unity, an ally of Bukele.
On the other hand, the opposition MP Anabel Belloso (FMLN), quoted by AFP did not hide her skepticism by declaring: “The law has many implications for the economic sphere and not everyone is in the clear on how this is going to work, taking into account that cryptocurrencies are volatile in the market, they are unstable. ”
The cryptocurrency market grew to more than 2.5 trillion dollars in mid-May 2021, according to the Coinmarketcap website which lists nearly 10,000 cryptocurrencies, boosted by the growing interest of investors from Wall Street and Silicon Valley . But bitcoin’s extreme volatility – currently priced at $ 33,814 after hitting $ 62,000 in April – along with its obscure legal status raises many questions about its sustainability.