El Salvador becomes the first country to adopt Bitcoin as legal tender

A majority of lawmakers in El Salvador voted to declare Bitcoin as the country’s official currency on Wednesday (June 9).

The Bitcoin Law received 62 out of 84 votes in of the Central American country’s legislature.

As soon as President Nayib Bukele announced the decision on Twitter, the price of Bitcoin went up 5% to $34,239.17.

“The purpose of this law is to regulate Bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out,” the law reads.

Additionally, President Bukele announced that immediate permanent residence will be offered to crypto entrepreneurs in the country.

The legislative move allows the people of El Salvador to display prices in the digital currency, besides getting the permission to pay taxes in Bitcoin. Also, exchanges in the currency will not be subject to capital gains tax and the exchange rate between Bitcoin and the US dollar will be freely established by the market.

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Angel investor Balaji Srinivasan sounded enthusiastic on the development. He said on Twitter: “Amazing. If I’m reading this right, all economic agents that are technologically capable of receiving BTC as payment *must* accept it as payment — though instant conversion to USD is made available to anyone who doesn’t want to take price risk. A mandate for Bitcoin.”

Several countries in the past have been critical of Bitcoin for its wild price fluctuations, which, they suggest, makes it unsuitable to be a trustful currency.

While it is still not known how El Salvador will implement Bitcoin as the legal tender, the new law suggests the state will “promote the necessary training and mechanisms so that the population can access Bitcoin transactions.”

Though there is considerable enthusiasm in several countries after El Salvador’s decision to adopt a digital currency, it is important to note that the Central American country could do so because it doesn’t have a currency of its own. El Salvador’s current official currency is the US dollar.

Analysts say that President Bukele wants to use Bitcoin, a cryptocurrency, to increase financial inclusion in a country with a majority of its population still miles away from having access to traditional financial services.