What is really behind El Salvador’s ‘Bitcoin Law’? Experts answer
Here’s what crypto and blockchain experts think about Salvadoran President Nayib Bukele’s announcement that Bitcoin is now legal tender.
Wouter Witvoet, CEO of DeFi Technologies:
“In the past, El Salvador struggled with trust in its monetary policy, so in 2001, it ‘dollarized’ its economy and effectively gave control of its monetary system to the U.S. Federal Reserve. It saw the U.S. dollar as a more stable, trustworthy currency than its own.
Since the 2008 global financial crisis, the U.S. has been pursuing a very experimental form of monetary policy involving tools like quantitative easing and a central bank that now directly monetizes, or purchases, government-issued debt to keep interest rates low. This is a playbook that is dictated by short-term needs and is driving down the value of the dollar. For a country like El Salvador, the adoption of Bitcoin as a legal tender is a hedge that Bitcoin will retain its value over the long term versus the dollar that has seen unprecedented levels of loss in buying power.
Where this goes over the long term remains to be seen, but this is just another example of an expanding list of countries and municipalities experimenting with use cases for Bitcoin and blockchain.”
These quotes have been edited and condensed.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Vanessa Grellet, head of portfolio growth at CoinFund:
“President Nayib Bukele’s ‘Bitcoin Law’ is supported by the transparency and speed of Bitcoin’s decentralized transactions. As 70% of El Salvador’s population is unbanked, accepting Bitcoin as legal tender allows financial autonomy for the Salvadorans that previously did not trust, or have access to, traditional financial institutions.
However, the entire payment infrastructure of the merchants accepting digital currency will need to be adapted to this new form of payment before it’s effective, and Bitcoin’s volatility as an asset class poses risks for Salvadorans, unlike stablecoins. El Salvador’s outcome will have a global impact, as it will inform the future decisions of governments and central banks exploring CBDCs.”
Tatiana Revoredo, co-founder and chief strategy officer of The Global Strategy, founding member of Oxford Blockchain Foundation:
“We have now moved out of the narrative stage of Bitcoin, where it’s enacted or adopted by a country as an asset on the balance sheet of the central bank, and we move to the next stage as legal tender.
And this impacts not only the economic aspect but several aspects, like a national and international human rights perspective — especially in El Salvador, where 70% of the country does not have a bank account but more than 50% of the country has access to the internet. So, there is a significant overlap of people whose lives are being changed as a result of this. And President Nayib Bukele knows this.
Most people don’t think Bitcoin is money, but with El Salvador’s new Bitcoin Law, and others to come, isn’t it really becoming money? It seems to me that the president of El Salvador is giving legal tender status to Bitcoin to fuel this change and transform the lives of the population for the better, and the advances in the Lightning Network enable this.
We are watching Bitcoin’s role as a fast, borderless payments vehicle become a reality. The socioeconomic impacts and the speed at which this will take place may surprise people.”
Shidan Gouran, co-founder of Gulf Pearl:
“El Salvador is predominantly a service economy, and its major export is human labor to the United States. Thus, international remittances form a major inflow of money into the country. When you pair this with the fact that roughly 70% of the nation is bankless and a significant amount of the incoming money is taken by middlemen and money service providers at unreasonable rates, you can see why Bitcoin would be an attractive option for the nation.
Since El Salvador was already using a foreign currency, the U.S. dollar, as its legal tender, it did not have to worry about any loss of seigniorage or control. Rather, it now has a dual model where both the U.S. dollar and BTC are legal tender options available to its citizens.
Barring any subversive intervention by the West, I believe that in the relatively short run, the new law will have a very positive impact on El Salvador’s local economy, especially given that part of the legislation protects against Bitcoin’s volatility by providing all vendors guaranteed access to a spot market for converting their BTC to dollars at a click of a button. On a global scale, El Salvador has already made a number of emerging countries explore incorporating Bitcoin as a tool in improving their financial systems.
Some disagree with my point of view on the short-term benefits of El Salvador’s Bitcoin initiative, citing that since a third of the population is without internet access, they will not benefit from Bitcoin as a solution for financial inclusion. First, if you consider these statistics and also assume, in the worst case, that all those who don’t have internet access are unbanked, then El Salvador’s Bitcoin Law would be directly responsible for the financial inclusion of, at least, 37% of its population, or at least 2.3 million individuals who would have been previously unbanked.
Furthermore, it is a fallacy to think that you need full internet connectivity for each citizen in order to take advantage of the Bitcoin network based on the system that El Salvador has set up. You actually don’t. What you do need is a nationwide mobile communications network. Virtually every Salvadoran, even in the most remote villages, has smartphones that are more than capable of running El Salvador’s official wallet app, and the 2G network connectivity that blankets the whole nation is actually all that the wallet requires in order to participate on the Bitcoin Lightning network. It wouldn’t be impractical, in the very near term, for the government to enable the wallet functionality for virtually every citizen as a core service, in addition to voice and text communications as primary mobile services, if the desire was there.
In the longer run, I think legal tender currencies that are not under the control of any particular government will be a major leap forward in making the world a better place and a step closer to a democratic ideal. My personal opinion is that Bitcoin currently has some inherent economic, environmental and technical flaws that make it a bad choice for an ultimate world currency. At the same time, as purely a societal construct, it can evolve to be the right system as the majority sees fit, and it will if it is to survive.”
Sheffield Clark, CEO of Coinsource:
“It was only a matter of time until a nation-state would announce making Bitcoin legal tender and a treasury reserve asset. El Salvador, using the U.S. dollar as its main currency, was a logical contender, as economies depending on the U.S. dollar are expected to be hit hardest if inflation continues to soar.
For El Salvador, it makes particular sense, as 70% of the population is unbanked, 22% of the country’s GDP is remittances and over 2 million Salvadorans are living in the U.S. alone. Crypto wallets are already today the de facto bank account replacement in emerging markets, as they also are in the United States.
Remittance fees can reach up to 50%, while Bitcoin-based solutions would bring the cost down significantly, particularly for the unbanked population. Reducing remittance fees could immediately drive GDP growth beyond 20% for El Salvador, with a strong signal for many other countries, as the U.S.–Latin America remittance corridor is the largest in the world.
This may not impact everyone in El Salvador directly, but we have seen in other parts of the world that the ability to transfer and store wealth in the form of Bitcoin has resulted in improved living standards of societies across many metrics. Bitcoin ATMs generally can provide instrumental support for both the on-ramp and off-ramp among the Latin American community in the United States.”
Shailee Adinolfi, director of strategic sales at ConsenSys:
“The Bitcoin Law shows that El Salvador is embracing a new asset class, and giving its people the green light in accessing it. The desire to use clean energy for mining is being applauded in the crypto ecosystem.
However, given the volatility of Bitcoin and Ether, people should be educated on the opportunities and challenges that these cryptocurrencies bring, and should understand the purpose and uses of stablecoins.
The lack of internet connectivity for so many in the country gives us another signal that there is an immediate need for more offline payment and safe storage solutions, linked to cryptocurrencies.”
Roger Ver, executive chairman of Bitcoin.com:
“Since the requirements to sign up with Lightning Network in El Salvador with Strike are about the same as the requirements to open a bank account, I don’t see how this is going to do much to help the unbanked.
Another major problem with the law is that it forces people to accept Bitcoin as payment.
In a just world, people would be able to choose for themselves what forms of payment they want to accept.”
Rodrigo Borges, managing partner of CB Associados:
“Bitcoin’s approval as legal tender by El Salvador is very positive for the market because, for the first time, a nation is adopting BTC as a new form of money.
Naturally, the characteristics of El Salvador’s economy facilitate its adoption, since the U.S. dollar is the official currency over there. Additionally, with a large number of expatriates, part of El Salvador’s economy depends on the remittances made by citizens abroad; therefore, adding Bitcoin as a legal tender facilitates the remittance of resources.
Currently, we have some uncertainty regarding the regulation of Bitcoin and other digital assets around the world. In this sense, entrepreneurs and institutional investors are seeking jurisdictions with positive regulation of digital assets. Therefore, having a nation adopting Bitcoin as legal tender is a strong signal to the market that El Salvador might be open to discuss a positive regulation for other digital assets.
For the above mentioned, it seems to me that President Nayib Bukele’s interest in the ‘Bitcoin Law’ would be to facilitate the remittance of funds by expatriates and turn El Salvador into a ‘crypto oasis’ in the Americas, which might encourage digital asset companies to establish their business in El Salvador.”
Rob Viglione, co-founder of Horizen:
“While it’s unambiguously a boon to the industry that El Salvador has made Bitcoin legal tender, and other countries will undoubtedly follow suit, real adoption at a country level will require a good deal of nuance. For instance, exchange rate mismatch could wreak havoc if not properly thought through. If debts contracted in Bitcoin must be paid in Bitcoin, independent of what happens to the price of Bitcoin relative to local currencies, you can easily see default risk skyrocketing. That said, thoughtful integration of Bitcoin and other digital assets into national economies would open the door for tremendous innovation and growth.
I share the broad industry sentiment about it being unambiguously good that countries are signaling support for crypto, but I can’t help but have a healthy skepticism for the particular news in El Salvador. I have some sense for Central American politics and crypto adoption — which is basically nonexistent. Given historic instability in parts of the world, like Central America, it sure would make sense for everyday people and businesses to get into crypto as fast as they can, but the reality is that most aren’t even considering it.”
Pablo Gonzalez, co-founder of Bitso:
“El Salvador’s move to adopt Bitcoin as legal tender is historic. It is rooted in hope for a better future. With 70% of Salvadorans lacking adequate access to basic financial services, and many heavily reliant on income from remittances, the adoption of Bitcoin in the country represents an opportunity for Salvadorans to realize the financial freedom they deserve.
In challenging the status quo, forward-looking Salvadorans have rallied to harness the power of this technology to increase financial inclusion and equity. We have made a commitment to work with the people of El Salvador on supporting and building the vision of Bitcoin for the country and are looking forward to being part of this evolution.
We believe Bitcoin can have a positive impact on the lives of millions, and we recognize that there are many more beneficial developments to come. We encourage the crypto community and our industry peers to rally in support of this game-changing opportunity. El Salvador, the region, and ultimately the world have much to gain from supporting and spreading this empowering technology.”
Napoleón E. Cornejo, computer engineer, technology specialist, founder of GeoKapti:
“It is important to understand the context in which the Bitcoin Law comes about. Since the start of his administration, it has been a goal of the president to undermine democratic institutions in El Salvador to centralize power. Worldwide news outlets have documented, for example, his siege of the parliament with the military in 2020, the unconstitutional ousting of the Supreme Court magistrates and the attorney general by his recent parliamentary majority, hampering the Institute for Access to Public Information, and the notorious lack of transparency.
Therefore a swift, extreme, radical measure of this sort can only happen in countries where there are no democratic checks and balances: A president surprises the nation, making the announcement at an international conference, and the next week, within three hours, the parliament approves it with no debate. In other words, this law is not a measure of vision or modernization. On the contrary, it’s a sign of a severely eroded democracy.
From a purely economic perspective, the law is unnecessary. Bitcoin was already being used by some communities without the need of a law, much less one that has a mandate to use it as legal tender. It is doubtful that this can scale countrywide in a population with low literacy (and even less technological literacy) and a struggling economy with a negative trade balance that would still require U.S. dollars to pay for imports.
It is, therefore, logical to assume that there are other reasons at play. The bad relationship with the United States and the expectation of sanctions seems a plausible explanation, as it may allow the bypassing of international financial controls. Media-savvy Bukele is also keen to build a superstar image of himself, and this law has pushed his persona onto the world stage.”
Luke Stokes, managing director of the Foundation for Interwallet Operability:
“Bitcoiners don’t like governments. Many in the Bitcoin space (myself included) have been labeled anarchists (which means ‘without rulers’) due to our desire to remove centralized rulers from controlling money.
Having attended the recent delegation to El Salvador led by Brock Pierce and meeting face to face with government representatives there, I’ve had to rethink the role that a government can play as the world transitions to a blockchain future. The officials we met acted more like entrepreneurs on a mission to accomplish their goals of making their Bitcoin Law an everyday reality for their country, leading to financial inclusion the world has never seen. Many other nations are watching, and I believe El Salvador will set the bar on how to prepare for and transition to the future of decentralized, self-sovereign money.”
Jane Thomason, co-founder of the British Blockchain & Frontier Technologies Association, CEO of Supernova Data:
“Certainly, this was a political moment of significance to the crypto community, who would see it as an important step in the road to the Holy Grail of mass adoption. However, for others in crypto, calling it ‘legal tender’ will undo a lot of hard work that has been done with regulators to classify crypto as a commodity. Indeed, it may attract more negative, unwelcome attention from U.S. regulators.
We have already seen people in struggling states like Venezuela, Lebanon, the Philippines and Zimbabwe using crypto remittances and using crypto as a store of value. The president has taken it one step further with his announcement that Bitcoin was legal tender. This has certainly attracted national and international attention. It may even have deflected attention from his many domestic woes for a short time.
However, I’m not sure it will help the poor people of El Salvador. Bitcoin was already legal, and many were already using Bitcoin for remittances. The mobile coverage is extensive, which means it was already accessible. Exactly how making Bitcoin legal tender changes the underlying economic and social problems of the country is hard to see. It certainly won’t reduce discrimination and despotic tendencies. As to whether crypto businesses will flock to El Salvador and provide a much-needed economic boost, only time will tell… Was that a flying pig?”
Giacomo Arcaro, professor at College Des Ingenieurs and TAG Talent Garden, founder of Black Marketing Guru:
“I do personally believe that this is just an extraordinary global marketing operation for Nayib Bukele to appear like a financial savior in front of his nation. This whole thing may lead to:
- Narcotraffic money laundering by using El Salvador’s banks as an OTC desk
- Crypto tax haven for all the Bitcoin millionaires from all over the world.
Let’s imagine a narcotrafficker with $1 million cash in El Salvador. All they have to do is just convert their stack into crypto via OTC by using online anonymous services and after that open a bank account, transferring legit BTC to a El Salvador’s bank as trading profit. This way, you can clean millions of dollars from all the non-legit businesses all around the world.
On the other hand, we have 130,000 crypto millionaires from Russia, China, the United States and Europe waiting for a country that gives them residency in exchange for a BTC deposit where they can avoid tax evasion crimes in their countries.
Bukele’s idea is good for him. What about the people?”
Eloisa Marchesoni, fixed-income crypto investor:
“Bukele is a right-wing populist, but this was not an internal move to appeal to his base, since there has been no official messaging at all. Anyone can use cryptocurrencies in El Salvador. However, giving it the backing of the law, one can use it in any transaction inside the country’s territory — but that currency is already used around the world.
So, where is the big news?
Unless… it’s to launder money freely within El Salvador. Organized crime, of course, loves its Bitcoin — the only problem is cashing out, but that’s easy if BTC is an official currency. Bukele has repeatedly denied links to local drug cartels, despite evidence of his past work with them to assist his political party.
Balaji Srinivasan has already proposed paying off small countries to pump Bitcoin with this sort of announcement. This may be how the El Salvador deal happened. Bukele also did it for the hype on the news, igniting the same FOMO in other emerging countries that China ignited in the United States with the digital yuan news.
It is no wonder that Jaime Guevara, the deputy leader of the Farabundo Marti National Liberation Front (FMNL), has filed a lawsuit against the Bitcoin legislation, joining forces with a group of locals that feel like such a law is to loot people’s pockets and force them to trade.”
Eli Taranto, chief business development officer at EQIBank:
“El Salvador is a country that has been plagued by corruption. After the end of its civil war in 1992, the country was mostly ruled by rival political parties, then gangs aligned with either the right or the left. This left the economy in shatters, where the largest source of income and foreign currency is still remittances from Salvadorans living abroad.
Nayib Bukele seems to be a clean break from El Salvador’s turbulent past, looking to give his country a fresh start. He is not aligned with any political party and he is a millennial, the son of a Palestinian imam, and married to a woman of Jewish descent — his unique background and family history are a testament to his independent, contemporary views.
Based on his recent interviews, the reasons seem clear enough: He understands that in many respects, Bitcoin is a lifeline in the post-COVID-19 reality for a country depending on remittances and the U.S. dollar. Transfers that cost almost nothing with Bitcoin would hugely benefit the ailing economy, especially considering that 70% of El Salvador is still unbanked.
Perhaps more importantly, due to its very nature, Bitcoin will protect the country from U.S. dollar inflation that’s bound to hit El Salvador in the very near term — a smart move that is likely to establish El Salvador as a major destination on the digital asset circuit, since BTC will not only become legal tender but also easy to mine, as El Salvador’s volcanoes offer an ideal and renewable thermal power source.”
Denelle Dixon, CEO and executive director of Stellar Development Foundation:
“During the health crisis, practical activities like standing in line for paychecks or remittances have raised important questions around the fairness of who has access to digital finance and who does not. The world’s existing financial system was made for the few and not the many, and blockchain can change that.
President Bukele has said that the implementation of digital currencies will ease the process for Salvadorans working outside the country to send money home. And in a broader sense, this move helps highlight the promise of blockchain technology as a more affordable, efficient medium of international exchange.
Recently, the international community has supported reducing remittance costs to end-customers; however, they still average 6%, according to the World Bank Group. Notably, in Latin America, remittances represent 15% of income for those at the base of the economic pyramid.
At the Stellar Development Foundation, we are focused on the use of digital currencies that are interoperable and extend traditional banking rails to ultimately deliver more equitable access to the global financial system.
We are encouraged to see El Salvador’s collaborative dialogue with international organizations. Our hope is that it enables a consumer-centric approach toward safe pathways for the expanded use of digital currencies across Latin America.”
Da Hongfei, founder of Neo, founder and CEO of Onchain:
“Freedom from U.S. domination is always a popular theme in Latin American politics. Due to its fragile financial systems, El Salvador — and many other Latin American countries — has no choice but to depend on the U.S. dollar. By embracing Bitcoin, this time Bukele has put El Salvador in a global spotlight while also positioning himself as a pioneer by becoming the first president to make Bitcoin a legal tender.
In terms of impact, I believe it will be mixed and limited in the short term. While Article 7 of the Bitcoin Law requires all businesses to accept Bitcoin payments, people may remain reluctant to accept Bitcoin due to price volatility and low awareness of Bitcoin; in fact, I believe many will choose to immediately exchange Bitcoin for U.S. dollars. Internet access in El Salvador is also limited, and many do not own smartphones, making me believe Bitcoin will not be widely adopted.
However, this law may attract more investment into technology by prompting crypto entrepreneurs to invest in and move to El Salvador. Moreover, it may help El Salvador establish a blockchain-based financial infrastructure. Given that 70% of the people do not own a bank account, it is possible that many will choose to own a digital wallet that allows for more free transfers of money than a traditional bank account.
Globally, this law is certainly a great boost for the crypto community, though some believe that Bitcoin should remain ‘money without a government,’ in that it does not need the legitimization of nation-states.
More importantly, it may affect how governments approach Bitcoin. If Bitcoin is recognized as a currency rather than a virtual commodity, some governments may feel more threatened and respond with stronger regulations, while others may accelerate the development of their own central bank digital currencies to avoid being subverted by a ‘digital nation-stateless currency.’ However, countries that are dissatisfied with the dollar standard may move to legitimize Bitcoin, thus building the narrative of Bitcoin as a financial equalizer. It is very possible that developing countries may embrace Bitcoin first, thus triggering a migration of talent, hashing power and social influence from developed to developing nations.
The Bitcoin Law is a massive social experiment that will ultimately test Bitcoin’s ability to challenge the dollar system while also exploring complicated political and economic waters.”
Cristina Dolan, founder and CEO of InsideChains, vice-chair of MIT Enterprise Forum:
“The brilliant timing of the enthusiastic announcement by El Salvador’s president, Nayib Bukele, during the well-attended Bitcoin Conference in Miami in June generated an optimal amount of buzz. Announcing that El Salvador would be the world’s first sovereign nation to adopt Bitcoin as legal tender to the largest possible audience of crypto enthusiasts is the best way to attract entrepreneurs and investors to its crypto-friendly shores.
Building out the networked infrastructure to support the announcement will require a sophisticated secure architecture, investment and talent. Managing the distribution of the $30 in Bitcoin to each adult will require more than simply educating the public on the use of the official digital wallet, ‘Chivo.’ Significant resources will be required to manage the cybersecurity to protect the Bitcoin accounts, integrate the traditional financial infrastructure and implement proper global regulatory Anti-Money Laundering, Know Your Customer and Travel Rule capabilities.
Another brilliant facet of the public relations plan is the $30 in Bitcoin, which provides consumers with the economic motivation to figure out how to set up their accounts and transact, which will create the required momentum to gain adoption among the unbanked citizens as well.
While the PR was brilliantly timed and executed, the country has many complex issues that will create challenges in attracting the required resources and global engagement required for success.”
Amber Ghaddar, сo-founder of AllianceBlock:
“I am still of the opinion that Bitcoin is a great alternative asset that has its place in an alternative portfolio allocation. However, Bitcoin lacks the characteristics of a currency in terms of providing stability to a financial system. Its high volatility and lack of recourse make it currently a less viable alternative to central bank currencies — particularly in developed economies.
Additionally, if you expect Bitcoin prices to go up in the future, it makes little sense to use your Bitcoin to pay for daily goods and services. 45% of the total Bitcoin circulating supply is hodled and has not moved in the past two years. Therefore, the velocity of Bitcoin vs. fiat money is much lower, making it akin to an investment medium rather than a payment medium.
There is no doubt that this is a bold move by El Salvador that could pave the way for smaller developing market economies to find new revenue streams through Bitcoin mining. Alternatively, it could lead to an increase in financial instability and have dire consequences in terms of inflation and access to capital. The world should definitely keep an eye on El Salvador. I know I am.”
Alexander Blum, managing director of Two Prime:
“El Salvador’s adoption of Bitcoin as legal tender by law offers the country some optionality in financial matters and sovereignty. Having recently dollarized the country, El Salvador is threatened by large loans and external controls of the country’s decision-making ability. This, in tandem with the national government voting against some of the president’s proposed spending, has limited Bukele’s ability to push through many of the reforms and modernizing proposals he wishes to enact.
Introducing Bitcoin as legal tender allows El Salvador to benefit from generating income through mining, attracting outside investment and interest from the crypto community, and reducing the cost of remittance for its citizens. The optionality with Bitcoin also provides some competitive alternative to U.S.-dollar loans and financial resources, at least providing the country with a stronger negotiating position.
The success of this initiative will largely rely on its execution. The ability to enforce the acceptance of Bitcoin or benefit from remittances in a country with minimal internet and communications infrastructure and the ability to mine Bitcoin profitably will have a large bearing on the success of Bukele’s efforts.”
Alberto Echegaray Guevara, aka “Cayman,” artist and entrepreneur:
“The vast majority of Salvadoran migrants, almost 2 million, work in the United States. Nearly one out of three Salvadorans send money home. Remittances account for 23% of El Salvador’s gross domestic product and benefit about 360,000 households, in the poorest areas of the country.
El Salvador’s official currency is the U.S. dollar. President Bukele’s Bitcoin Law is not only trying to make international money transfers cheaper and easier for 70% of his unbanked population, but also is trying to create a new economic hub and a new remittances platform in Central America. Bukele, as a smart politician, will capitalize on the impact of lowering the cost to near zero for $6.5 billion in remittances.
In my experience, after working 10 years in multilateral organizations in Washington, DC and being a representative at the FATF, I recommend that President Bukele strengthen his law with the support of an international financial integrity team. His social impact policy and strategy will need the support of a strong international network of financial intelligence units and key players in the international development arena.
Bukele has the unique opportunity to change the game of the global remittances business by having a proof of concept in one of the most important regions for money transfer, and using Bitcoin for the first time in history.”
Introduction
Last month, Salvadoran President Nayib Bukele’s “Bitcoin Law” was passed by El Salvador’s Legislative Assembly, giving the world’s first cryptocurrency the status of legal tender — something that is indeed a historic milestone for Bitcoin (BTC). The news was appreciated by the crypto community, and the flagship cryptocurrency surged 11.98% to $37,573 after the announcement.
President Bukele chose the perfect time and place to announce it: during the Bitcoin 2021 conference in Miami. It’s hard to imagine a more grateful audience of crypto supporters and advocates to be the audience for such an announcement. As Marc Powers, a law professor and former United States Securities and Exchange Commission attorney, described it in his latest opinion article: “The showstopper was […] the young president of the Republic of El Salvador, Nayib Bukele, who hails from the most densely populated country in Central America. […] At the conference, Bukele announced that the country would adopt Bitcoin as a second native fiat currency, on par with the U.S. dollar.” And here’s how President Bukele described his intentions:
“In the short term this will generate jobs and help provide financial inclusion to thousands outside the formal economy.”
And while some argue that the Salvadoran experiment might be a bottleneck for Bitcoin, this law could be a solution to provide financial services to the nation’s people, considering about 70% of the population is unbanked. Meanwhile, the new law in El Salvador is about to forcibly onboard everyone, as it states:
“Every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.”
The important question is: Will the mandatory transfer to crypto work? It has been said many times already that mass adoption of cryptocurrency is possible, but only through educating people so that they can gain a better understanding of crypto. Will President Bukele educate people on how to use crypto? Additionally, one-third of the population in El Salvador lacks access to the internet, which would make it impossible for them to access Bitcoin and crypto services. How is President Bukele going to solve this problem in order to “provide financial inclusion” as he promised?
Also — and crucially important — a transition toward crypto should be a free-will choice made by the people themselves and not a forced decision made by a president. That notion is a core value of all cryptocurrencies — an aspect of their decentralized nature. But the highly centralized nature of President Bukele’s actions seems quite logical, given that he has been said to be on a path toward becoming “Latin America’s first millennial dictator.” In a country that is accused of having some serious problems with human rights — with Human Rights Watch reporting that “Girls and women accused of having abortions have been imprisoned for homicide and aggravated homicide” and that “LGBT individuals face discrimination and violence with no effective state protection” — this sort of “progressive” legislation raises an important question: Was it really done for the benefit of Salvadorans?
From the financial perspective, adopting Bitcoin as legal tender also poses significant legal and financial ramifications. The big question that must be raised here is whether this decision will result in the recognition of Bitcoin as a foreign currency. If so, will Bitcoin transactions be subject to a financial transactions tax? And since the vast majority of jurisdictions do not classify Bitcoin as a currency, but as an asset, the answer seems clear. Also, the World Bank already refused to support El Salvador’s request for help in the transition to using Bitcoin as legal tender.
Regardless, El Salvador’s decision is indeed a historic event for the crypto industry. To find out what crypto and blockchain industry representatives think about President Bukele’s “Bitcoin Law,” Cointelegraph reached out to a number of them to ask for their opinions on the following question: What, in your opinion, is behind El Salvador’s decision to give Bitcoin the status of legal tender, and how it will affect the space?
