El Salvador’s Law Making Bitcoin Legal Tender to Take Effect in September, Paraguay to Follow
El Salvador’s President Nayib Bukele said in a national address that a recently passed law making bitcoin legal tender would take effect on September 7, noting that its use will be optional.
The countries’ Congress has already approved the proposal to embrace the cryptocurrency with a supermajority, making El Salvador the first country in the world to do so. Bukele said,
“The use of bitcoin will be optional, nobody will receive bitcoin if they don't want it… If someone receives a payment in bitcoin, they can choose to automatically receive it in dollars.”
Salaries and pensions will also continue to be paid in USD, he added.
“One of the reasons we passed the bitcoin law is precisely to help people who send remittances,” said Bukele, adding the usage of crypto for remittance will eliminate the high cost of commissions involved in sending money across borders.
“The wallet app will even work anywhere with a cell connection, and you won't have to have a cell plan for the app.” pic.twitter.com/6EiTNu4PGU
— Documenting Bitcoin 📄 (@DocumentingBTC) June 25, 2021
El Salvador relies heavily on money sent back from workers abroad. Remittances to the country made up nearly $6 billion, about a fifth of its gross domestic product (GDP) in 2019, one of the highest ratios in the world, showed World bank data.
According to Kenneth Suchoski, US payments and fintech analyst at Autonomous Research, less than 1% of the volume of global cross-border remittances are currently in cryptocurrency, which is expected to account for a larger share in the future.
On Thursday, Athena Bitcoin said it plans to invest over $1 million to install 1,500 crypto ATMs in El Salvador, especially where residents receive remittances from abroad.
President Bukele “presented us with a tough challenge of 1,500 ATMs, we will go for that, but in phases. We are a private company and we want to ensure that our development in the country is sustainable,” said the firm's director for Latin America Matias Goldenhörn.
Athena installed its first crypto ATM in the country's El Zonte beach as part of an experiment called Bitcoin Beach.
Amidst this, Paraguay is working on becoming the second country in the world to accept Bitcoin as legal tender.
Lawmaker Carlos Rejala is leading a bid to implement legislation to make Paraguay the second country to follow in El Salvador’s footsteps. Rejala announced on Twitter that he would be introducing a bill in the national Congress in July.
This Paraguay bitcoin proposal is coming from a minor political party. That will be the trend. Independent politicians using bitcoin as a banner to gather voter and financial support. Change will take time. But LATAM is dead tired of its ruling political parties. https://t.co/LlA0kvTfJe
— Alex Krüger (@krugermacro) June 24, 2021
The bill that will be published on July 14 and seek to establish Bitcoin as legal tender will also introduce measures to make Paraguay a hub for foreign crypto investors.
Rejala first outlined his vision early this year when he said he was working with the crypto community in the country to make it a hub for the crypto investors and “subsequently to be placed among the ones on the cutting edge of digital technology.”
Juanjo Benitez Rickmann, the CEO of crypto exchange Bitcoin.com.py, then confirmed that he collaborated with the congressman to make Paraguay a crypto-friendly country and take “advantage of the renewable and inexpensive energy provided by hydroelectrics.”
Rejala, too, has emphasized Paraguay’s access to renewable energy as an impetus for attracting investment. Nearly 100% of the country’s electricity needs are served by hydroelectric plants, while 90% of all energy it produces is exported to neighbors Brazil and Argentina. Rejala while speaking to La Nación newspaper on Friday said,
“We are proud that since we announced that we are working on a bill that legalizes the use of digital assets… as legal tender in Paraguay for any type of commercial transaction, various Paraguayan companies have already joined and taken a step forward into the new era of transactions.”
Last week, a Paraguay-based large entertainment holding company said that 24 of its businesses would start accepting crypto as payment options from July.