El Salvador President Nayib Bukele has declared he intends to make Bitcoin (CRYPTO: BTC) legal tender in the Central American nation.
The move would make El Salvador the first country in the world to accept the cryptocurrency as legal tender. Let's take a closer look at the news.
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Bitcoin to be legal tender
In a video broadcast at the Bitcoin 2021 conference on Sunday morning (AEST), President Bukele said he planned to submit a legislature bill to El Salvador's legislative assembly that would make Bitcoin legal tender.
According to President Bukele, the move would give El Salvador's citizens more financial freedom.
In a Twitter Inc. (NYSE: TWTR) thread, the president stated that 70% of El Salvador's population did not have bank accounts – making the ability to transfer Bitcoin outside of banks a major upside to the use of crypto as official currency.
He added that US$6 billion worth of remittances were sent to Salvadoran families each year – a large percentage of which was taken in fees.
President Bukele tweeted:
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.
President Bukele also stated if 1% of Bitcoin was invested into El Salvador, the country's GDP would increase by 25%.
The president went on to sell El Salvador to potential residents – offering permanent residency in the nation to cryptocurrency entrepreneurs.
El Salvador's financial troubles
According to reporting by Forbes, El Salvadore's use of the US dollar as its major currency has recently caused issues for the country.
In 2001, El Salvador replaced its own currency with the US dollar to stabilise the nation's financial system.
Then, in an effort to minimise the economic impacts of the coronavirus pandemic, the US Federal Reserve increased the amount of available US dollars.
Forbes reported the move by the US Federal Reserve caused El Salvador to lose purchasing power due to inflation.
Unlike the US dollar, the amount of Bitcoin available is capped – meaning it's more resistant to inflation.
About the Bitcoin price
The Bitcoin price has fallen 8% since President Bukele's announcement on Sunday, with a single Bitcoin trading at $42.227 at the time of writing. This continues a significant drop in the Bitcoin price over the past month, down 43.8% since 8 May.
