El Salvador has approved a landmark bill that will introduce a law to classify Bitcoin as legal tender, making the Central American nation the first in the world to make such a law.
Following a proposal by President Bukele last week, 62 out of 84 lawmakers voted in favour of the bill to formally embrace cryptocurrency.
The use of Bitcoin in El Salvadore has been touted by Bukele as a way in which to provide citizens working abroad to send remittances home more easily.
Their economy relies heavily on money sent back from citizens working abroad. In total, World Bank data shows that remittances to the country made up nearly $6 billion, a fifth of GDP, in 2019.
The president highlighted that this move will bring in “financial inclusion, investment, tourism, innovation and economic innovation” to the country.
The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
According to Bukele, the use of Bitcoin will be completely optional and the US dollar will also continue as legal tender. However, Bitcoin’s use as legal tender will become law in 90 days.
“The government will guarantee the convertibility to the exact value in dollars at the moment of each transaction,” Bukele said.
However, experts have raised their concerns that the move to Bitcoin may complicate talks with the IMF, where El Salvador is seeking a programme of more than $1 billion.
Like all other cryptocurrencies, Bitcoin is not backed by any other government or any central bank and only exists online.
Due to their value depending on their limited supply, some see it as volatile and risky. Bitcoin, which is currently priced at $36,127, has also faced scrutiny over the ease of avoiding taxation with it as a cryptocurrency and the murky legal status it holds.
That said, there has been a growing interest from serious investors from Wall Street and Silicon Valley that has allowed the cryptocurrency market to grow to more than $2.5 trillion in mid-May last year.
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