Five years ago, El Salvador’s government took a significant step by declaring bitcoin as a legal currency.
Recently, the government is redirecting its focus toward a different type of cryptocurrency, aiming to enhance financial transactions, as reported by Bloomberg News on Tuesday, September 29.
The administration led by Nayib Bukele is collaborating with the software firm Modveon to launch a government-supported platform known as Sivar. This platform will enable Salvadorans to store and transfer stablecoins, including for remittance purposes, utilizing Coinbase’s Base network.
Bloomberg has characterized this initiative as a “notable turnaround” for a government that previously embraced bitcoin as a common currency alternative.
The Sivar platform will authenticate users through official identification and categorize them based on their residential addresses. Users will not only be able to send funds but also share content, engage in live discussions and polls, as well as vote in local elections while residing overseas.
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Modveon has partnered with El Salvador as its initial client, planning to focus exclusively on this market until the model proves successful in the Central American nation.
This initiative arrives five years after El Salvador became the first nation to recognize bitcoin as legal tender. However, as reported by Bloomberg, this has not led to bitcoin becoming a widely accepted payment method.
By 2024, approximately 92% of Salvadorans reported they had not engaged with bitcoin, according to a survey conducted by the University of Central America. Additionally, the International Monetary Fund indicated that only 1.75% of remittances were processed through cryptocurrency wallets.
In related developments, PYMNTS noted last week that stablecoins are evolving from mere crypto assets into integral components of the financial infrastructure.
“Stablecoins no longer need to compete with cards, bank accounts, or existing payment systems. Instead, they can function as an internal settlement technology supporting them,” the report stated.
Amid these changes, a pivotal question in the industry is shifting from whether digital currencies can achieve scalability to who has the authority to issue, distribute, settle, and oversee them.
“The clear indication is that digital money is becoming more integrated into conventional finance. Conversely, a crucial insight is that stablecoins are gaining significance to the point where the financial system is beginning to adopt their most beneficial attributes without relinquishing economic control to stablecoin firms,” the report concluded.
