Daily Management Review

El Salvador becomes the first country in the world to recognise bitcoin as national currency


El Salvador's congress overwhelmingly approved a bill introduced by the president to recognise bitcoin as an official currency. The small Central American country thus became the first in the world to take this step.

Jernej Furman
Jernej Furman
The 39-year-old president of El Salvador believes the adoption of Bitcoin as a national currency will help "improve the lives and future of millions of fellow citizens". 

In his view, the development of more diverse financial instruments is a "moral imperative" - just like developing El Salvador's economy by giving citizens access to credit, investment and secure transactions. Some 70% of the country's population is unbanked and works in the shadow economy.

According to the president, "a huge proportion of the country's circulating $6 billion is deposited with intermediaries. The use of bitcoin will increase the income of about a million low-income families".

The country's high share of the shadow economy is largely due to high levels of illegal business, including drug trafficking. 

According to the UN, El Salvador and several other Central American states are important transshipment points for shipping drugs from South America to North America, with 4-5 tons of cocaine passing through El Salvador alone each year. Independent researchers say drug trafficking and other criminal businesses are controlled by Central America's leading organised crime groups - MS-13 and Barrio-18 - with an estimated 60,000 members in El Salvador.

source: reuters.com