Nayib Bukele, President of El Salvador, will address the Congress at the Legislative Assembly building in San Salvador, El Salvador on Tuesday, June 1, 2021. Photographer: Camilo Freedman / Bloomberg via Getty Images
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El Salvador was the first country to introduce Bitcoin as legal tender.
The legislature in Congress of the South American country voted with an “overwhelming majority” for the Bitcoin law.
The previous Wednesday, President Nayib Bukele sent the law to the country’s Congress for a vote.
“The purpose of this law is to regulate Bitcoin as unrestricted legal tender with liberating power, unlimited in every transaction and for every title that public or private natural or legal persons must comply with,” the law says.
Prices can be displayed in Bitcoin, tax contributions can be paid using the digital currency, and exchanges for Bitcoin are not subject to capital gains tax.
Bitcoin is known for wildly fluctuating prices that have led critics to believe that it is unsuitable as an effective currency. It is still unclear how El Salvador will eventually adopt Bitcoin as legal tender.
According to the law, the exchange rate to the US dollar is “freely determined by the market”. The current official currency of El Salvador is the US dollar.
The law also states that the state “will promote the necessary training and mechanisms so that the population can access Bitcoin transactions”.
About 70% of El Salvador do not have access to traditional financial services under the Bitcoin law. The cryptocurrency is seen as a way to increase financial inclusion.
The proposal must go through El Salvador’s legislative process before being passed into law.
Bukele’s move to bring the bill to Congress came after he announced last week that El Salvador had partnered with digital wallet company Strike to build the country’s modern financial infrastructure using bitcoin technology.
Bitcoin hit a record high of $ 64,829.14 in April, but has fallen by almost half since then, according to CoinDesk data. It’s still up over 230% in the past 12 months. This surge was attributed to a number of factors, including increased interest from institutional investors and large companies like Tesla and Square buying bitcoin.