Nayib Bukele, President of El Salvador, announced Monday that he would present legislation next week to make Bitcoin a legally accepted tender in the country. If passed, the bill would make El Salvador the first nation to accept a cryptocurrency as a legal tender. Despite the announcement coming during one of the largest crypto crashes in recent history, Bukele said he believed the introduction of Bitcoin would help some of the country’s economic woes, like a low rate of open bank accounts and a relatively high level of unemployment.
The platform best positioned to benefit from El Salvador's Bitcoin initiative appears to be Strike, a crypto payments processor developed by Chicago-based startup Zap Solutions. Accepting crypto as legal tender might sound radical, but it's not the first time the country has adopted it in lieu of fiat currency. Strike already has a toehold on the country at Bitcoin Beach, an initiative in a small town called El Zonte where Bitcoin is used for nearly all transactions including utilities, groceries and even educational grants. A statement by Zap Solutions said CEO Jack Mallers has been "providing insights" to El Salvador to help the country in this push. Mallers was featured on Forbes’ 30 under 30 class of 2021 for finance, and Zap Solutions recently announced a $14.5 million funding round in March.
The successful adoption of Bitcoin in El Zonte is thanks in part to a technology that operates on top of cryptocurrency called The Lightning Network, which expedites the otherwise notoriously slow Bitcoin transactions that are often referenced as an obstacle in the way of mainstream acceptance. Today, cryptocurrency is often regarded in financial circles like a stock or some other asset that you should have in your portfolio. But some of crypto’s earliest advocates believed it would usher in a future of decentralized finance and organizations. That dream is alive on a small scale in El Zonte.
El Zonte’s success and the partnership between a head of state and an American, venture-backed startup is representative of the growing power of cryptocurrency holders.
“The new listing decision is making cryptocurrency your government’s legal tender,” Balaji Srinivasan wrote on Twitter. “Cryptonetworks are attaining the scale (millions of holders) & resources (billions of dollars) to start conducting foreign policy. Like digital proto-states, negotiating with nation states.”
Despite the announcement and despite proponents of crypto heralding the news as a major step forward, Bitcoin’s price continued its decline. At the time of writing, Bitcoin has lost $2,000 in value since the June 5 announcement. Bukele said he would present the proposed bill next week.