El Salvador approves law making it first country to accept bitcoin as legal tender along with US dollar
- El Salvador has become the first country to make bitcoin legal tender in addition to the US dollar.
- Bitcoin will no longer be subject to capital gains tax and can be used to pay taxes.
- The president said the country would use "cheap and clean" volcano energy in the mining process.
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El Salvador's Congress on Wednesday voted in favour of a law that will make it the first country to establish bitcoin as legal tender alongside the US dollar. Once the law has passed through the relevant legislative processes, bitcoin will have the same status as the US dollar, which is the country's current national currency.
"The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress. 62 out of 84 votes! History! #Btc," President Nayib Bukele tweeted alongside a bitcoin emoji and the El Salvadorian flag, confirming the success of the bill he had presented to lawmakers.
Once the bill has passed further legislative stages, bitcoin will become legal tender. Bitcoin exchanges will no longer be subject to capital gains tax, all entities must accept bitcoin as a payment method for goods and services, prices can be displayed in bitcoin and El Salvadorians will be able to use the cryptocurrency to pay taxes.
Bitcoin will automatically and immediately be converted into US dollars upon use. The government and El Salvador's central bank will oversee the necessary infrastructure development and provide financial education to businesses and citizens. The energy-intensive process of mining bitcoin, which critics of the cryptocurrency have described as detrimental to the environment, will be fueled by "cheap, clean" volcano energy, the President said.
El Salvador is the smallest country in central America in terms of population, according to the World Bank. Its economy is the 106th out of the 195 countries the International Monetary Fund ranks.
Last week, when Bukele first announced the bill, he said the country would collaborate with digital-wallet company Strike to facilitate the usage of bitcoin, but the exact rollout plan was still unclear.
Bukele's bill cited financial inclusion and economic growth as reasons for adopting bitcoin, which states 70% of El Salvadorians are unable to access "traditional financial services".
"It is necessary to authorise the circulation of a digital currency whose value answers exclusively to free-market criteria, in order to increase national wealth for the benefit of the greatest number of inhabitants." the bill said.
Various economists and analysts have previously stated bitcoin is too volatile to ever be used as an actual currency. Bitcoin and other cryptocurrencies are known for their sensitivity to external developments that include comments on social media, such as tweets, or calls for tighter regulation.
Bitcoin rose slightly after the bill passed. It was last up 3.53% in the 24 hours to 5:02 am E.T. and was at $34,074.40 (R477,036.00) after having lost more than 12% the previous day.
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