El Salvador is the first country to recognize Bitcoin as legal tender

  • El Salvador on Wednesday became the first nation in the entire world to officially grant legal tender status to cryptocurrency Bitcoin.
  • A majority of the South American country’s lawmakers gave their nod to a bill presented by President Nayib Bukele, which proposed embracing the world’s highest-valued cryptocurrency as legal tender in the country.
  • Bukele said that people who invest in Bitcoin in El Salvador will get citizenship in the country.
  • With 62 out of 84 possible votes, a huge majority of lawmakers of El Salvador voted in favour of President Bukele’s initiative, according to a Reuters’ report.
  • The majority of lawmakers have agreed to create a law that will officially adopt Bitcoin.

A majority of El Salvador’s lawmakers have approved a bill to officially accept Bitcoin as legal tender. President Nayib Bukele has backed the use of Bitcoin, explaining it will help Salvadorans send remittances home. The US dollar will continue to be legal tender in the South American country.

The law will go into effect in 90 days, according to President Bukelle, and will guarantee convertibility to US dollars at the moment of each transaction. There are concerns about the potential impact of this on the country’s program with the International Monetary Fund (IMF), Reuters reports. The bill was passed with 62 out of 84 possible votes, a huge majority of lawmakers voted in favour of President B Dukelle’s initiative.  

In The Breakdown podcast, Nathaniel Wittemore mentioned that President Bukele explained that “the world had lost too much of its optimism that it had forgotten that the future is what we make of it and that Bitcoin is a force for restoring that optimism”. Bukele also went on to say that in the immediate term it could create new jobs and help the 70% or so of the country’s citizens who aren’t connected to the traditional financial system.

The Bitcoin community was celebrating this bill as a massive step for cryptocurrency global adoption.

This decision also addresses legal questions of what the point is from an accounting and tax perspective. One specific area of El Salvador’s economy is in remittances and this accounts for about 20% of El Salvador’s GDP, the companies – the facilitators remittances – can charge 10% or more and in general has must be picked up from the physical location.

Last Saturday Bukele tweeted that Bitcoin has a market cap of 680 billion dollars and if 1% of it is invested in El Salvador that would increase the country’s GDP by 25%. On the other side, Bitcoin will have 10 million potential users and will be the fastest growing way to transfer 6 billion dollars a year in remittances. As a big chunk of those six billion dollars is lost intermediaries, by using Bitcoin the amount received by more than a million low-income families will increase by the equivalent of billions of dollars.

Main photo: Nayib Bukele, PresidenciaSV, CC BY-SA 4.0 https://creativecommons.org/licenses/by-sa/4.0, via Wikimedia Commons

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