Ask about Bitcoin on Wall Street, and you'll find investors who swear that the cryptocurrency will revolutionize finance. Others might claim that it's doomed to collapse. Ask folks in El Salvador, however, and they may simply note that Bitcoin is actually the country's official currency.
Salvadoran president Nayid Bukele announced in September that Bitcoin had become legal tender alongside the American dollar. El Salvador even purchased 400 bitcoins, then worth roughly $20 million.
Once worth less than a cent, Bitcoins have sold for more than $40,000 apiece in recent weeks, with the total value of all Bitcoins exceeding $800 billion. Meanwhile, in the first quarter of 2021, crypto startups drummed up $2.6 billion in funding from investors.
For El Salvador, however, the real value of Bitcoin may come in the form of cheaper remittances. President Bukele claimed that Bitcoin would make payments cheaper and could save Salvadorans $400 million or more on commissions paid to such things as credit card purchases. He also argued that legalization could spur foreign investment.
Remittances account for nearly a quarter of El Salvador's GDP, with roughly 360,000 homes receiving transfers. Bitcoin is especially promising, given that 70 percent of Salvadorans don't have a traditional bank account. El Salvador also launched the "Chivo" wallet app, but it has been plagued by technical glitches.
Ukraine also recently moved to legalize Bitcoin and other cryptocurrencies. The country may move to make Bitcoin legal tender, meaning it could be used to settle debts and pay for products. Ukrainian leaders hope that legalization will spur investments and turn the country into a cryptocurrency hub.