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El Salvador wants Bitcoin to be legal tender; here's why

Bukele vouches for Bitcoin, saying financial inclusion is not only a moral imperative but also a way to grow the country's economy. He says even if 1 per cent of Bitcoin is invested in El Salvador, it will increase country's GDP by 25 per cent

twitter-logoBusinessToday.In | June 8, 2021 | Updated 23:52 IST
El Salvador's president Nayib Bukele wants Bitcoin to be legal tender; here's why
El Salvador's Millennial president Nayib Bukele

South American country El Salvador's Millennial president Nayib Bukele changed his profile pic on Twitter by sporting "laser eyes" soon after he announced that the biggest cryptocurrency Bitcoin will become legal tender in the country. With this, El Salvador could soon become the first country in the world to formally adopt virtual currency as legal tender. His New Ideas Party enjoys a huge majority in the country and it's expected that the new law on Bitcoin will receive approval from lawmakers soon.

In a series of tweets on Monday, Bukele vouched for Bitcoin, saying financial inclusion is not only a moral imperative but also a way to grow the country's economy. He said if 1 per cent of Bitcoin is invested in El Salvador, it will increase the country's GDP by 25 per cent.

"Bitcoin has a market cap of $680 billion. If 1% of it is invested in El Salvador, that would increase our GDP by 25 per cent. On the other side, Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances," Bukele said.

He added that a big chunk of those 6 billion dollars is currently lost to intermediaries. "By using Bitcoin, the amount received by more than a million low-income families will increase in the equivalent of billions of dollars every year," he said, adding it will improve lives and the future of millions.

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Around 70 per cent of El Salvador's population doesn't have a bank account and work in the informal economy. "Financial inclusion is not only a moral imperative but also a way to grow the country's economy, providing access to credit, savings, investment and secure transactions," he said.

He hoped the decision will be just the beginning in providing a space where some of the leading innovators can reimagine the future of finance, potentially helping billions around the world.

El Salvador, along with Ecuador and Panama, has a 'dollarised economy', meaning they have the US dollar as the official currency. The country had accepted the US dollar as its official currency in 2001 after the right-wing government in the country scrapped its monetary policy.

El Salvador is a Central American country, bordering the North Pacific Ocean, between Guatemala and Honduras. It is the smallest country in land area in Central America and has a population of 64 lakh and an area slightly bigger than Meghalaya. At least 20 per cent of its population lives abroad, and the country depends heavily on remittances.

Bukele's party won the elections at the top office after gaining a landslide victory in presidential polls in 2019. He's the first El Salvadorian president to win without the support of major parties in the past 30 years. He has promised to end gang violence in the country. He is also seen as an authoritarian leader. Recently, he removed five judges of the Supreme Court and the attorney general- officials. They all had been critical of his policies amid the Covid-19 pandemic. Buleke was heavily criticised for his decision to remove the SC judges.

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