On 9th June 2021 something quite historic happened: the government of El Salvador voted to recognise bitcoin as legal tender. The bill didn’t pass with a slim majority, it got a supermajority vote in the nation’s legislature, and it was expected that President Nayib Bukele would sign it into law immediately. The next step after that is to discuss it with the International Monetary Fund.
President Bukelele presented the parliament with his vision for the leading cryptocurrency, pitching it as an effort to boost financial inclusion in a country where only 30% of citizens have access to financial services. Furthermore, he said in a Twitter conversation that bitcoin users would not be pressed to use a government-issued wallet for their funds.
The president also said that the new law would mandate “all businesses to accept bitcoin for goods or services,” but added, “the government will act as a backstop for entities that aren’t willing to take on the risk of a volatile cryptocurrency.” He described how this will work: the government will set up a trust at the Development Bank of El Salvador to instantly convert bitcoin to U.S. dollars and this fund will assume merchants’ risk. It will hold about $150 million in dollars, and will keep the fund topped up by selling bitcoin for dollars.
Bukele ssiad: “If there’s an ice cream parlor, he doesn’t really want to take the risk, he has to accept bitcoin because it’s a mandated currency, but he doesn’t want to take the risk of convertibility, so he wants dollars deposited in his banking account, when he sells the ice cream, he can ask the government to exchange his bitcoin to dollars. Of course, he can do that in the markets also, but he can ask the government to do it immediately.”
Bitcoin mining and volcanic energy
Bukele also indicated that the government may promote bitcoin mining, and it looks as if it is ready to make use of its excess geothermal energy for this purpose. Less than 14 hours after getting approval for his bill, Bukele was talking to El Salvador’s geothermal company, LaGeo and directing them to let power-hungry bitcoin miners plug into his country’s volcanic resources. He tweeted “I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanoes.” The 39-year-old leader then added, “This is going to evolve fast!”
He did admit that he hadn’t really thought about an efficient use for all his volcanic energy before now, but since he had a lightbulb moment, he’s ready to tap into the country’s hundreds of megawatts of untapped geothermal potential as well as a network of underutilized power plants. It’s a well-spotted opportunity and the speed at which Bukele has moved with respect to bitcoin as legal tender and the use of excess energy for mining underscores the levels of power this young president has.
Residency only costs 3 Bitcoin
And there was other good news for anyone looking for a new country of residence: President Bukelele announced that he is creating a new law that will allow any individual who invests three BTC into El Salvador’s economy to have permanent residency. With bitcoin today at $36,841, that means residency would only cost around $110,000. It could be time to investigate the benefits of being an El Salvador resident.
Last night Bukele tweeted, “Every day is going to be a new idea.” As they say: watch this space, and the rest of Latin America.