Mon | Sep 20, 2021

El Salvador president wants bitcoin as legal tender

Published:Tuesday | June 8, 2021 | 12:09 AM
President of El Salvador Nayib Bukele delivers his annual address to the nation before Congress, in San Salvador, on June 1, 2021.
President of El Salvador Nayib Bukele delivers his annual address to the nation before Congress, in San Salvador, on June 1, 2021.

El Salvador President Nayib Bukele will send proposed legislation to the country’s congress this week that would make bitcoin cryptocurrency legal tender in the Central American nation, he announced in a recorded message played at a bitcoin conference in Miami on Saturday.

The 39-year-old president, who has maintained approval ratings above 90 per cent and made Twitter his preferred way of communicating, characterised it as an idea that could help El Salvador move forward.

“... I will send to Congress a bill that will make bitcoin a legal tender in El Salvador,” Bukele said. “In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy, and in the medium and long term, we hope that this small decision can help us push humanity at least a tiny bit into the right direction.”

The US dollar is El Salvador’s official currency. About one-quarter of El Salvador’s citizens live in the United States, and last year, despite the pandemic, they sent home more than US$6 billion in remittances.

Bukele’s New Ideas party holds a super majority in the new congress seated on May 1, giving any legislative proposal from the president a strong likelihood of passage.

Additional details of the plan were not released, but Bukele, in subsequent messages on Twitter, noted that bitcoin could be “the fastest-growing way to transfer $6 billion a year in remittances.” He said that a big chunk of those money transfers were currently lost to intermediaries, and with bitcoin, more than a million low-income families could benefit.

He also said that 70 per cent of El Salvador’s population does not have a bank account and works in the informal economy. Bitcoin could improve financial inclusion, he said.

Riding his high popularity and his party’s dominant performance in the February 28 elections, Bukele has concentrated power. His party’s super majority in congress ousted the justices of the Constitutional Chamber of the Supreme Court on May 1. They then replaced the attorney general.

They had been critical of some of Bukele’s more drastic measures during the pandemic, including a mandatory stay-at-home order and containment centres where those caught violating the policy were detained.

While enjoying a positive relationship with former American president Donald Trump, Bukele has had a much more tense relationship with the administration of President Joe Biden.

Last month, the White House Special Envoy for the Northern Triangle, Ricardo Zúñiga, said during a visit to El Salvador that the United States government would like to see El Salvador reverse the moves against the court and the attorney general. Bukele said that that would not happen.

Bukele’s concentration of power, attacks on critics, and open disdain for checks on his power have raised concerns about El Salvador’s path. However, Bukele has a wide base of support in part due to the utter failure of the country’s traditional parties, which ruled during the past 30 years, to improve people’s lives and to his ability to provide short-term benefits.

Bukele has been praised for aggressively obtaining COVID-19 vaccines and running an efficient vaccination programme far more successful than El Salvador’s neighbours.