Technology

#El Salvador to adopt Bitcoin as real money — good news for the unbanked

#El Salvador to adopt Bitcoin as real money — good news for the unbanked

Around the world, bitcoin has a mixed reputation. Owning and using the cryptocurrency is legal in a majority of nations, tolerated in many others, and outlawed by a relatively small number.

El Salvador has just become the first nation to formally adopt the cryptocurrency as legal tender, and a handful of other Latin American leaders have indicated that they would follow suit. This marks a sharp change in bitcoin’s reputation on the global stage.

Backed by a public ledger called “the blockchain”, holders of bitcoin enjoy a fast and secure way to make payments or receive funds. And El Salvador clearly has a need to receive funds fast. Like many other nations, El Salvador’s economy is heavily dependent upon “remittances”, or funds sent home by citizens working abroad. Remittances totaled over 20% of GDP in 2019.

Currently, remittances are delivered by Western Union or other money transfer services which are necessarily centralized and highly regulated. Sending funds can be complicated, involving an in-person visit to an agent’s office and proof of identity for both the sender and receiver. Although there are over 500 Western Union offices across El Salvador, those living in rural areas of the nation are particularly inconvenienced.

By contrast, cryptocurrencies like bitcoin allow anyone with a mobile phone to send or receive funds, regardless of location. A software app known as a “wallet” manages the cryptocurrency as needed. Such wallets are safeguarded on phones and protected by passwords or biometric mechanisms like fingerprints.

Recipients of bitcoin realize their funds by connecting to the internet. Once bitcoin has been received, there are multiple ways to exchange cryptocurrency for cash.

An illustration of several hands holding up smartphones, with images of bitcoins being transferred between them.

Close

Please allow ads on our site

Please consider supporting us by disabling your ad blocker!