Five years ago, the government of El Salvador made bitcoin legal tender in the country.
Now, the country’s government is shifting to another form of cryptocurrency in its effort to transform money movement, Bloomberg News reported Tuesday (Sept. 29).
According to the report, Nayib Bukele’s administration is working with software startup Modveon to develop a government-backed platform called Sivar that will permit Salvadorans to send and hold stablecoins, including for remittances, using Coinbase’s Base network.
Bloomberg describes the change as a “striking reversal” for a government that once saw bitcoin as a new version of everyday money.
The report says Sivar will verify users via government-issued identification before steering them into communities according to their home addresses. In addition to sending money, users will also be able to post content, take part in live discussions and polls, and vote in local elections even while living abroad.
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El Salvador is Modveon’s first client, and the company said it has no plans to push into other markets until it has shown that the model can work in the Central American country.
The program comes five years after El Salvador became the first country to make bitcoin legal tender. But according to Bloomberg, this has not caused the most popular form of cryptocurrency to become a mainstream payment method.
As of 2024, around 92% of Salvadorans said they had not used bitcoin, the report added, citing a survey by the University of Central America. The International Monetary Fund found that just 1.75% of remittances were transferred through crypto wallets.
In related news, PYMNTS wrote last week about stablecoins’ shift from crypto product to part of the financial infrastructure.
“Stablecoins no longer need to displace cards, bank accounts or familiar payment interfaces. They can become an internal settlement technology beneath them,” that report said.
As this is going on, the industry’s key question is moving from whether digital dollars can scale to who is allowed to issue, distribute, settle and control them.
“The obvious conclusion is that digital money is moving into mainstream finance. The more consequential one is almost the opposite,” the report added. “Stablecoins are becoming important enough that the financial system is starting to absorb their best features without necessarily surrendering the economics to stablecoin companies.”
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