When El Salvador passed a law making bitcoin legal in the country, it did not set itself on a path to add a payment option to the existing infrastructure. It provided regulatory clarity that allowed the existing Bitcoin-forward platform to better serve its citizens.
Thanks to the regulation, Strike, a startup focused on the Lightning Network that helps El Salvador build a national Bitcoin-based payments system, will not need to replace the US dollar with Tether’s USDT stablecoin.
Why Strike had to use USDT in El Salvador
Strike CEO Jack Mallers participated in a talk ring From the “What Bitcoin Did” podcast, prior to his first trip to El Salvador to work with Bitcoin Beach community, it has reached out to some financial institutions in the country and discovered that it is illegal for a financial service to hold dollars on behalf of the user. In addition, there was no regulatory clarity regarding Bitcoin in El Salvador at the time.
As a result, he immediately saw weakness in helping the majority of the country’s population who cannot access the traditional banking system through take the blow.
Thus, Strike, which takes advantage of dollars and the Bitcoin Lightning Network to allow instant and cheap payment transfers around the world without intermediaries, had to resort to using USDT to achieve minimum viable product functionality in El Salvador.
However, after the country’s president bill to submit Bitcoin legal tender agreedStrike was able to secure partnerships with some of El Salvador’s largest banks, which would be Lightning interoperable. Mallers said the resulting system will replace the US equivalent of automated clearinghouses with the Lightning Network, without the need for USDT.
Tethers are no longer part of anything,” Mallers said on the podcast. “Tether was part of the plan originally because it had to be, because I had no choice.”
Benefits of letting go of the rope
The ability to give away USDT on the platform is an ability that should be highly preferred by many in El Salvador, given the issues of Tether as a project.
Since its launch in 2014, Tether has stated that its USDT tokens are fully backed by US dollars in bank accounts. But it focused in 2019 to say that its reserves include traditional currency and its equivalent, and other assets and amounts. The move sparked suspicion and criticism in the Bitcoin community. The New York attorney general found that it was owned by Tether Misrepresentation of assets that support USDT And withholding the loss of $850 million in user funds. Currently, Only 4% of Tether’s reserves are cash.
In the podcast, Mallers celebrated that Strike no longer needed to use the controversial USDT for its financial services in El Salvador.
“You know, you start with Tether, you learn, you are a good listener and a good observer, and you end up meeting with the president and helping to define regulatory clarity in the country, and then you take out Tether,” Mallers said. “And you are helping the country build the most comprehensive, resilient, and reliable financial infrastructure that any country has seen in human history.”
Mallers also shared that Strike will integrate with the country’s two largest “cash point dispensers,” a solution that allows “unbanked” people to walk to a physical location with dollars or app balance and cash out. Through this integration, Strike will have more than 1,000 cash points across El Salvador and other countries in Central America, allowing people to easily move physical money into or out of their Strike app balance.