The Legislative Assembly of El Salvador voted early this morning to pass the Bitcoin Law, with 62 votes in favor (56 of whom were from President Nayib Bukele’s New Ideas Party) out of the 84-person Assembly. The new law makes bitcoin legal tender in the country, along with the U.S. dollar, and it must now be accepted by all financial institutions and businesses in the country.
Bukele argues that the use of bitcoin will facilitate sending remittances from Salvadorans working abroad (about one-third of the population is currently in the United States and sends back some $6 billion in remittances every year). That is 22% of El Salvador’s GDP. Bukele is trying to put alternatives in place should the Biden administration and Wall Street impose sanctions on his government including blocking remittances, which is a very real possibility. That would obliterate the Salvadoran economy within weeks, and Bukele knows it.
Bukele has also argued that bitcoin will bring investment and jobs into El Salvador. That is false. Bitcoin is a wildly fluctuating speculative financial instrument, with no actual production behind it.