El Salvador to become the first country in the world to use bitcoin

Written by By Victor Mallet, CNN

The small Central American country of El Salvador has announced plans to become the first in the world to set up a city based on the cryptocurrency bitcoin.

Last week the local government presented a plan, titled “El Bitcoin Landscape,” which details how bitcoin has been incorporated into projects and infrastructure designed to develop and generate a local industry around the cryptocurrency.

The plan forms part of a five-year plan aiming to create a hub for “emerging and innovative technologies” by 2021.

The project, published online, envisages blockchain technology-led development as well as incubation, research and training.

Historic expansion

El Salvador is one of only a handful of countries to officially recognize bitcoin as a form of currency, following a vote in March.

The Central American country will follow the example of countries such as the state of Georgia and allow bitcoin derivatives to be traded on its own securities market.

At first the details of the plan were highly sensitive, with publications in local media quoting the government itself only as saying that bitcoin would be the subject of the plan “in the future.”

Now officials have been more open about what’s happening.

‘May blockchain be with us’

“The aim is to develop a micro-currency that will support these regions and communities in terms of technology,” Luis Sánchez Vargas, the nation’s deputy minister of economic administration, told CNN.

Gonzalo Gassomo, economic adviser to the national planning commission, noted that El Salvador was ‘unique’ in its approach: “The aim is to play by the rules that the rest of the world has developed.”

A key aim of the five-year plan is to help create an ‘El Salvador bitcoin ecosystem’ by creating what Vargas calls “tech hubs,” early stage technology firms and an incubator to promote innovation.

“We are willing to offer so many advantages to keep the ecosystem together and developing,” he said.

“The bitcoin ecosystem is very important for us,” said Vargas. “For the first time in our history, we are the first country to extend two different initiatives.”

The nation will create an incubator to promote the “innovation” of blockchain. Credit: Courtesy The One Economics

El Salvador’s first bitcoin City

Countries including South Korea and Japan have either officially or informally approved bitcoin as a form of money. Despite its late entrance, the cryptocurrency in Central America has already revolutionized the economy in a number of smaller towns in the country.

Some have given bitcoin owners guarantees on the value of their cryptocurrency investments, while others have provided rental benefit subsidies.

Raul Cesar Gracia, El Salvador’s minister of communication and cyber security, commented on the developments on Twitter.

“At a time where everybody is blaming El Salvador for deficits and debts, our prime ministers move forward with an even deeper structural reform to move and manage our country in order to create more inclusive economic growth,” Gracia tweeted.

If implemented, bitcoin will be the first central-point infrastructure for central banks’ crypto-currency payments, according to a recent report by The One Economics and ThinkHost. The virtual currency, endorsed by two governments in the region, will also act as a formalized back-up of a country’s online payments system, the report noted.

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