El Salvador has become the first country to adopt bitcoin as legal tender. The country’s lawmakers voted in favour of Bitcoin Law 84 to 62. The price of bitcoin went up 5% to $34,239.17 shortly after the vote.
“The purpose of this law is to regulate the crypto 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.
Prices can now be shown in bitcoin, tax contributions can be paid with the digital currency, and exchanges in the crypto will not be subject to capital gains tax.
The crypto is known for wild price swings that have prompted critics to suggest it is not suitable to be an effective currency. It’s still unclear how El Salvador will ultimately roll out bitcoin as legal tender.
The exchange rate with the U.S. dollar “will be freely be established by the market,” according to the proposed law. El Salvador’s current official currency is the U.S. dollar.
The law also says that the state will “promote the necessary training and mechanisms so that the population can access the crypto transactions.”
Approximately 70% of El Salvador does not have access to traditional financial services, according to the Bitcoin Law. The cryptocurrency is seen as a way to increase financial inclusion.
President Nayib Bukele’s move to submit the law to Congress comes after he announced last week that El Salvador has struck a partnership with digital wallet company Strike, to build the country’s modern financial infrastructure using bitcoin technology.
