The Future Of Bitcoin? El Salvador Makes Bitcoin Legal Tender

Author Justin Gilmore
The Genmega and Chainbytes Bitcoin ATM machines pictured side by side

In a ground-breaking vote from congress, El Salvador has become the first country to accept Bitcoin as legal tender. By securing 62 of 84 votes from legislators, the bill reclassifies cryptocurrency’s acceptance, use, and function within the country. The ripple effect of this change has set a new global precedent, and other countries around the world have started to accept Bitcoin as a form of digital payment.

With legal tender status, Bitcoin (BTC) is now considered an official currency by the El Salvadoran government and will fall under similar fiat currencies’ standards and compliance regulations (El Salvador’s reserve currency is the U.S. Dollar). All debtors, businesses, and payment processors must accept Bitcoin as remuneration when offered.

Why Did El Salvador Formally Accept Bitcoin?

The passed bill is considered innovative but has also fallen under intense scrutiny. Global lawmakers are cautious of digital currencies since they are decentralized and deregulated. El Salvador did receive some pushback after its central digital wallet went offline. While that may show some of the instability involved with cryptocurrencies, the delay came from added server capacity as large corporations such as Mcdonalds began accepting payments in BTC.

Outside of simple access and a progressive approach to fiscal policy, the El Salvadoran government instituted Bitcoin for several other reasons:

1. Foreign Investment, Job Creation, and Financial Literacy Gains

President Nayib Bukele stated that the move into Bitcoin would create pathways for foreign investment, boost the economy with more jobs, and provide access to a primarily unbanked nation. 70% of El Salvadorans do not have bank accounts because of a lack of financial access and an overall distrust in formalized savings. With digital cryptocurrencies (and their ledger systems located on blockchain technology), public access, security, and convenience can promote financial literacy and a usable asset class for the government. Investment, inclusion, and economic development are the key factors driving the Bitcoin decision.

Moreover, money transfers fees made from abroad make up close to 20% of El Salvador’s GDP. The move to a flexible digital token can accelerate that monetary growth while removing payment barriers for the nearly two million Salvadorans outside the country.

2. Remittance and Payment Transfers Made Easy.

Six billion USD flowed into El Salvador in 2019, one of the highest remittance ratios in the world. Of those transactions, the amount initiated via Bitcoin increased by four times from the year before. Bitcoin funds sent from worldwide locations increased to 1.7 million in USD, up from the $424,000 the year prior.

Salvadorans have already capitalized on BTC as a method for remittances. Chainalysis states that payments less than $1000 increased from about 1000 transactions in April 2019 to 12,000 transactions in June 2021. The monthly value of BTC transfers boosted from $178,000 to $2.6 million in the same time frame.

How Did We Get Here?

Much of El Salvador and its historical and political connection with the United States have led to the landmark inclusion of Bitcoin as legal tender.

In the 1990s, the country had just emerged from a long civil war that had decimated the economy. To keep interest rates low, promote global trade, and propel the economy forward as it held steady inflation rates, El Salvador went through a process of dollarization, where it connected itself to the USD as a reserve currency.

This coincided with many Salvadorans abandoning the war-torn state for the safety of North America, starting the now common practice of remittance and payment transfers critical to El Salvador’s present economy.

Around 2004, about 60% of all Salvadorian exports traded with the United States, and the stability of the U.S. dollar supplanted the national currency, the Salvadoran Colón. Many found the complete reliance on the U.S. damaging to the Salvadoran values, and they have fought to create a more stable nation-state outside of American currencies.

Bitcoin presented a possible solution to El Salvador’s economic limitations between lower global GDPs and the need for U.S. Trade and currency support. Bitcoin will join the USD as a reserve currency, slowly relieving El Salvador’s need for capital in U.S. Dollars.

Why Bitcoin ATMs?

For the rest of the world, the disruptive nature of Bitcoin and its ability to support El Salvador’s economy provide continued proof of the value of cryptocurrencies. Other countries have followed El Salvador’s example:

  • Brazil: The Brazilian government accepted bill 2.303/15, initiating a vote about the status of Bitcoin within the country. While Bitcoin did not obtain legal status, Brazil defined it as a virtual asset, allowing Brazilians to pay for digital currencies with crypto coins (similar to how airline miles work for retail purchases).
  • Panama: Congressman Gabriel Silva announced Crypto Law, a bill designed to make Bitcoin legal tender in the footsteps of El Salvador.
  • Paraguay: Carlitos Rejala, a member of the Chamber of Deputies, announced he would run for president on a political platform that would make Bitcoin Paraguay’s official currency.
  • Ukraine: Ukraine passed a draft law that will legalize cryptocurrencies after the El Salvadoran bill came into effect. The country even has plans to start building cryptocurrency mining rigs.

Even the U.S. Federal Reserve has plans on creating a government-backed cryptocurrency. The infrastructure for Bitcoin and Bitcoin ATMs is growing amidst governmental acceptance.

The Critical Piece of the Digital Infrastructure is Bitcoin ATMs.

Cryptocurrency kiosks are the gateway between the consumer and a money transaction, allowing for the convenient use of a digital token. That access leads to widespread adoption, a fundamental tenet in each government’s plan for financial inclusion.

Already, this has caused Athena Bitcoin to install close to 1500 Bitcoin ATMs (BTMs) at the request of President Nayib Bukele. The kiosks are non-technical entry points for average consumers, facilitating more robust spending and formalized saving. Having an easy and secure way for Salvadorans to buy, sell, and exchange Bitcoin will help boost free-market growth factors.

Undoubtedly, other Bitcoin-leaning nation-states will look to the pioneering efforts of El Salvador, and that offers an opportunity for Bitcoin ATM owners. Panama has only 21 placed BTMs, the entire country of Ukraine has 39, and Paraguay has one single kiosk. For Bitcoin ATM investors, global placements present potential returns.

Expect Bitcoin ATMs to continue their rapid installation worldwide as the consumer infrastructure plays its role in altering digital money and global financial access.

Learn more about our first-of-a-kind Bitcoin ATM Ownership Program to find out how you piggyback off our existing cryptocurrency kiosk infrastructure to enter this fast-growing Bitcoin customer market.