El Salvador Shifts to Stablecoins as Bitcoin Payments Wane

Five years ago, El Salvador made bitcoin legal tender, but now the government is pivoting towards stablecoins, according to Bloomberg News. The administration, led by Nayib Bukele, is collaborating with software startup Modveon to create a government-backed platform called Sivar. This platform will enable Salvadorans to send and hold stablecoins, including for remittances, using Coinbase's Base network.

Sivar will verify users via government-issued identification and direct them into communities based on their home addresses. Users will also be able to post content, participate in live discussions, polls, and vote in local elections while living abroad. This shift marks a significant reversal for a government that previously viewed bitcoin as a new form of currency.

El Salvador is Modveon's first client, and the company has no plans to expand to other markets until it demonstrates the success of the model in Central America. Despite the shift, bitcoin's mainstream adoption as a payment method remains low, with around 92% of Salvadorans not using it as of 2024, according to a survey by the University of Central America.

A report by PYMNTS highlights the industry's focus on stablecoins as they move from being a cryptocurrency product to becoming an essential part of financial infrastructure. The report also discusses the questions surrounding who will be allowed to issue, distribute, settle, and control these digital currencies.