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Move Over Musk: Bitcoin Could Become Legal Tender in ... El Salvador

El Salvador's president reportedly made the announcement at the Bitcoin 2021 conference in Miami and in Twitter posts.
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Tesla  (TSLA) - Get Report honcho Elon Musk gets all the credit lately for driving cryptocurrencies up and down, but he might have some competition, the young president of El Salvador, Nayib Bukele.

Bukele reportedly said over the weekend that he was putting together proposed legislation to make bitcoin legal tender alongside the U.S. dollar in the Central American nation.

Bitcoin rose modestly over the past 24 hours -- by 1.7% -- to $36,069.76. It's up 4.4% over the past week, according to CoinGecko.com. That's a far cry from the roller coaster ride it's seen over the past several weeks when it started its swift move downward in May, but still a steady move upward. 

"Next week I will send to Congress a bill that will make bitcoin a legal tender in El Salvador," Bukele said, according to news reports, at the bitcoin event in Florida. "In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy and in the medium and long term we hope that this small decision can help us push humanity at least a tiny bit into the right direction."

The nation currently uses the U.S. dollar as currency, after it replaced the colon two decades ago. Bordered by Guatemala and Honduras on one side and the Pacific on the other, El Salvador is the tiniest nation in Central America, but has the area's fourth largest economy, which relies heavily on remittances from citizens living in the U.S.

"Bitcoin has a market cap of $680 billion dollars," said Bukele over a thread on Twitter over the weekend, arguing that if 1% of the cryptocurrency were invested in El Salvador, "that would increase our GDP by 25%. On the other side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances."

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Remittances from Salvadoran citizens working in the U.S. make up more than a fifth of El Salvador’s  gross domestic product, according to the U.S. State Department. The nation's GDP was roughly $27 billion in 2019. El Salvador, with a population of more than 6 million, is the U.S.' 59th largest goods trading partner, with $5.8 billion in total goods traded during 2019.

A large portion of that $6 billion remittance figure "is lost to intermediaries," said Bukele, noting that by using bitcoin, the amount received by "more than a million low income families will increase in the equivalent of billions of dollars every year. This will improve lives and the future of millions." 

In addition, he noted that nearly seven in 10 El Salvadorian's have no bank account. 

"Financial inclusion is not only a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment and secure transactions."

Under the proposal by Bukele, the nation would collaborate with digital currency company Strike, according to CNBC.

Bitcoin has been struggling to recover to higher levels against the dollar since the second half of May. In April, it saw a high surpassing $64,000, but has in recent weeks been has been in the mid-$30,000 area. Elon Musk has been credited in the media for much of bitcoin's big moves over the past couple months, and for moves in other cryptos like dogecoin, following his appearance on "Saturday Night Live" recently and posting his views on Twitter.

This story has been updated.