El Salvador has become the first country in the world to adopt bitcoin as legal tender after its congress approved President Nayib Bukele’s proposal to adopt cryptocurrency in an effort to promote “financial inclusion”, investment and economic development.
Bukele, a media savvy former mayor of the capital San Salvador who was elected president in a landslide victory two years ago, is known for his love of technology and his penchant for attention-grabbing stunts.
Despite concerns that the move could complicate talks with the IMF, in which El Salvador seeks a financing program worth more than $ 1 billion, Congress approved the two-page proposal Tuesday night. with 62 of the 84 votes of the assembly. The congress is controlled by the president’s party and its allies.
The use of cryptocurrency as legal tender, along with the US dollar, will take effect in 90 days and the market will set the bitcoin / dollar exchange rate. Salvadorans will be able to pay their taxes in bitcoin and “every economic agent” must accept the cryptocurrency as payment unless they do not have access to the necessary technology.
Bukele, 39, had announced the move in a recorded message played at a bitcoin conference in Miami on Saturday.
“This will create jobs and help bring financial inclusion to thousands of people outside the formal economy, and in the medium and long term we hope that this small decision can help us move humanity at least a little bit in the right direction.” Bukele said.
Bukele, a former marketing executive, has suggested that bitcoin could make it easier for Salvadorans living abroad to send home remittances that totaled $ 6 billion in 2019, a fifth of the country’s GDP.
The president, who said that the new law “will bring financial inclusion, investment, tourism, innovation and economic development for our country,” added previously. the “laser eyes” in favor of cryptocurrency to its Twitter profile picture.
His enthusiasm, however, is not universally shared.
Father José María Tojeira, director of the Human Rights Institute at the University of Central America, said that very few Salvadorans would have the technical capacity to access bitcoins.
“The decision is quite incomprehensible. It seems more like putting on a show, which is a characteristic of this government: a lot of propaganda, but few structural changes to help the impoverished population, ”he said.
David Morales, from the human rights group Cristosol, described the legislation as “political marketing” and contrasted the speed of the decision with the government’s refusal to consider legislation to guarantee water rights or the reform of the country’s draconian abortion laws. The Savior.
“It was an idea that the president came up with and it became law in a few hours,” he said. “This type of important decision is made as part of a marketing strategy, rather than having an actual national debate.”
Carlos Carcah, a professor at El Salvador’s Higher School of Economics and Business, noted that bitcoin is extremely volatile, meaning that investors “run the risk of getting rich and poor the next day.” But Carcah added that while the adoption of the cryptocurrency was “neither necessary nor convenient … as long as there is someone who accepts payment with bitcoin, as well as accepts dollars, there would be no problems.”
Although Bukele says that around 70% of people in El Salvador lack access to traditional financial services, the use of cryptocurrency for remittances globally is patchy. Converting local currencies to and from bitcoin often relies on informal brokers, prices are volatile, and buying and selling is a complex process that requires technical knowledge.
Analysts said the Central American country’s experiment would be closely followed elsewhere.
“The market will now focus on adoption through El Salvador and whether other nations will follow,” said Richard Galvin of crypto fund Digital Asset Capital Management. “This could be a key catalyst for bitcoin for the next two to three years.”
Bukele made headlines around the world in February last year when he marched soldiers in combat uniforms to Congress and told MPs to approve a loan for new security equipment or to reconvene in seven days for another session. .
The president’s concentration of power, attacks on critics, and open disregard for controls on his power have raised concerns about El Salvador’s path. However, it has a broad base of support thanks, in part, to the failure of the country’s traditional parties that ruled for the past 30 years to improve people’s lives, and to their ability to provide short-term benefits.
George is Digismak’s reported cum editor with 13 years of experience in Journalism