Shankar Iyer
The announcement on Wednesday that El Salvador would use Bitcoin (BTC) as legal tender has surprised the crypto world. Cryptocurrency exchanges saw a spike in the price of BTC when President Nayik Bukele announced the move.
This historical moment is viewed by many as an experiment. El Salvador is the first nation in the world to approve a cryptocurrency as legal tender, but the impact of the legalisation is far from clear. Regardless, the ramifications of such a move will be immeasurable, as this is something that has long been spoken about amongst crypto evangelists within the community.
The announcement was approved by a supermajority in the El Salvadorian Supreme Court, which, bizarrely, was announced by the President via Twitter. The full details were disclosed regarding the new law, as crypto holders the world over scrambled to take advantage of the action, with some even looking to buy property in El Salvador with Bitcoin.
But, what does this mean for the people of El Salvador? Can citizens now make everyday purchases using bitcoin app wallets or crypto debit cards? For the most part, it’s still too early to know. Nonetheless, we’ll explore what we already know and what can be expected as a result of the legislation of Bitcoin.
Which companies in El Salvador will accept Bitcoin?
El Salvador is a country that became dollarized back in 2001, giving up the native colón, when the American dollar was brought in as legal currency. Given that the country’s economy is already based on a foreign nation’s economy, this move wasn’t as far-fetched as some may like to claim. Moreover, embracing the thriving Bitcoin has been in the pipeline for over a year, with many stores and organizations already positioned for such a move.
While many might more clarity, one certain thing is that Bitcoin will now have the strength of a currency accepted as a payment system by all companies or online marketplaces. Bitcoin will be seen as a parallel payment channel working alongside the other recognised legal tender in the country, the U.S. dollar. El Salvador’s ongoing monetary change indicates that a reserve fund will be used to convert Bitcoin into dollars. Quite possible, people in El Salvador may see local stores quoting prices in cryptocurrency, with any purchases made from fiat to crypto or vice versa, exempt from capital gains tax. The decision means purchasing will do away with remittance payments incurred using the dollar and save the country millions, drastically improving El Salvador’s GDP.
One of the concerns among companies is the volatility of Bitcoin holdings held in custody. But, this is something that many of the payment systems and wallets will deal with for customers and businesses. Right now, the concern for both small and large companies in El Salvador is how to swiftly migrate their “point-of-sale” systems to also accept Bitcoin. It's not impossible to envision many crypto payments companies making fast entries or opening up offices in El Salvador to help speed up Bitcoin adoption by merchants.
But, how is this done? Well, customers don’t need to hold Bitcoin—it isn’t mandatory for El Salvadorians. If you’re going to buy a pizza and you’re concerned that the value of Bitcoin fluctuating will drastically affect when you should make the purchase, there’s no need to worry. Citizens can store dollars as they have done for over two decades. They can continue to hold dollars by making the purchase using Bitcoin and receive dollars in change. The whole process can be managed using many of the technologies already available in the crypto fintech industry.
The company pioneering the El Salvador Bitcoin experiment is the mobile payments app company — Strike.
What are the best Bitcoin wallets for El Salvadorians?
Nayib Bukele, the President of El Salvador has enlisted the CEO of Strike Jack Mallers to help onboard Bitcoin as a payment system for the citizens of El Salvador. The government intends to create a wallet shortly, which will function similarly to Strike. It will allow cashless, instantaneous payments to anywhere in the world through a very simplistic app. In keeping with Bitcoin’s central theme of independent money management, the government app which is under development won’t be mandatory.
For now, Strike is the recommended option for Bitcoin users in the country. We've listed some of its features below:
- A digital wallet using Strike’s Open Lightning Network allowing for fast action payments.
- Converting dollars to Bitcoins instantaneously without fees.
- Making payments to each other, buying goods and services online, making micropayments and buying and selling Bitcoin instantly.
While the focus is on the use of the Open Lightning Network, the important thing for users will be working with a wallet that requires zero fees for payments and transfers. There are a variety of great wallets available today, the likes of Exodus and Electrum are already very popular and provide a service without additional fees.
Can Gift Cards boost business in El Salvador?
One of the pitfalls to integrating and adopting Bitcoin as the main currency in the country is finding a way to perform purchases using the current point of sale (POS) systems. One short term alternative to rolling out Bitcoin into existing POS systems would be to use a substitute payment method.
One such substitute payment method is the use of gift cards. For instance, Bitrefill is a payment system allowing customers to make payments using a variety of major cryptocurrencies — one of which, of course, is Bitcoin. Using gift cards as a way to accept Bitcoin for goods and services could potentially be a seamless way for companies to meet the requirements of the new legislation. That too without creating a separate Bitcoin infrastructure from scratch, or having to retrain their workforce on accepting a new digital currency.
What’s next?
While we are still in the speculation phase of this project, El Salvador may become the hub for Bitcoin and we could see a huge boost in the country’s economy as a result of such a bold move. One thing is for sure, this is one more step away from centralised finance and one step closer to the new money paradigm—and potentially one that could improve the lives of people across the globe.
For those that reside in El Salvador and are looking to buy Bitcoin, take a look at Binance. Binance caters to customers across the globe, including the growing crypto community in El Salvador. Signing up is quick and simple—Join the biggest cryptocurrency exchange platform in the world today.
