When June started, El Salvador was just another country. However, if there’s anything that the crypto industry has taught many, it is that things can change pretty quickly.
Such is the story of this country, which legalized Bitcoin to become a legal tender this month. By doing so, El Salvador has written itself into the history books and is now top on the list of anyone looking to spend their crypto in peace.
Bitcoin Accepted Here
Earlier this month, Nayib Bukele, the president of El Salvador, announced on Twitter that a bill to make Bitcoin legal tender in the country had passed. Bukele’s tweet confirmed that the bill had gotten 62 out of 84 votes, marking a striking majority of the Salvadorian Congress.
As Bukele explained, accepting Bitcoin will now be a compulsory thing for all businesses in El Salvador. Just like the dollar, Bitcoin has become a mainstay in the countryBukele also added that he would be meeting with the International Monetary Fund (IMF) to discuss how best to transition into this new economic reality.
Under the new regime, people who invest as much as 3 BTC in El Salvador will immediately be able to get permanent residency.
Stepping Into the Mining Crisis
On the same day, Bukele tweeted that he would instruct Mynor Gil - the president of state-owned electricity agency LaGeo - to look into how to apply volcano energy to mining. El Salvador has about 23 active volcanoes, many of which are prone to eruptions. As Bukele explained, these volcanoes provide a source of renewable, clean, and cheap energy with zero emissions.
LaGeo operates two geothermal power plants in El Salvador. By providing a space for Bitcoin mining, the company could do a great deal to help improve the asset’s environmental sustainability. This is especially timely since there have been several questions about Bitcoin’s benefit to the environment following Tesla’s decision to stop accepting it as a payment method.
El Salvador is primed for the green crypto evolution. Over half of the country’s energy comes from renewable sources, thus putting it in a strong position to explore the implications of clean mining.
El Salvador’s government is only the second organization to do something about Bitcoin’s current mining debacle. Earlier this month, Square announced that it would invest $5 million to develop a solar-powered mining facility. With more organizations stepping in and doing their part, it is possible to make Bitcoin more environmentally friendly in the long run.
Payments Coming Soon
With the pace of development that El Salvador has seen, some rumors have also been raised about the possibility of Bitcoin being used to facilitate payments in the country. Roland Castro, the country’s Minister of Labor and Social Welfare, told a local radio station that the government is looking into how companies in the country can pay their employees with Bitcoin.
Castro explained that the salary payment development could also move into government agencies as his ministry was looking into the possibility of making Bitcoin payments for workers as well.
El Salvador’s 2011 Law of Monetary Integration, which allowed the country to replace the Salvadoran colón with the U.S. dollar, points out that only those two currencies can be used to pay salaries. However, since the colóne is barely in use, Bitcoin might step in to serve as a replacement.
While Castro did eventually claim that this payment development would be too soon, it goes to show how quickly El Salvador is ready to move on with crypto. The country has become one of the world’s most crypto-friendly countries, and this could set off a domino effect that would see other countries look into crypto acceptance on the broadest scale.
Development Could Meet Some Pushback
While progress has been rapid, it is worth noting that not everyone is on board with El Salvador and its crypto revolution.
For one, remittance firms in the country have been reluctant to support cryptocurrencies. Kenneth Suchoski, a FinTech analyst at Autonomous Research, told Reuters that remittance firms are unlikely to just switch to crypto because of El Salvador. As he explained, customer demand remains low, so the local payments industry isn’t quite as mature yet.
Suchoski claimed that less than 1 percent of all cross-border remittances are conducted using cryptocurrencies. So, there isn’t a market large enough to force payment service providers to switch their behavior.
“For Western Union and some of the other remittance providers, keep in mind that most of the volume in the remittance industry is going from developed markets to emerging markets primarily to people — families and friends — that operate in cash… To the extent that bitcoin isn’t adopted and there’s not widespread acceptance, these remittance providers are still going to be relevant for the years to come.”
There is also some pushback from the World Bank. On Wednesday, Alejandro Zelaya, the Salvadorian finance minister, said that the country had been seeking technical assistance from the World Bank on how best to transition into crypto. Sadly, the World Bank refused the request, citing Bitcoin’s environmental impact and lack of transparency. However, it explained that it could help El Salvador with areas such as regulatory processes and currency transparency.