El Salvador led by President Nayib Bukele has on Wednesday become the first country in the world to formally adopt cryptocurrency – Bitcoin – as a legal tender.
Lawmakers in the Central American country’s Congress today voted by a “supermajority” in favor of Bitcoin Law, receiving 62 out of 84 of the legislature’s vote.
According to President Bukele, the initiative will boost foreign investment, improve financial inclusion and generate jobs.
Bukele, who announced plans to introduce a bill adopting Bitcoin as legal tender in El Salvador on Saturday, made the announcement of the new law on Wednesday via his Twitter page.
The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
Bitcoin is set to become legal tender in 90 days, meaning every business must accept the token for goods and services, alongside U.S. Dollar.
Prices can now be shown in bitcoin, tax contributions can be paid with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax.
The law passed with the support of Bukele’s allies despite minority opposition parties — who had criticised the speed of the vote — refusing to back it.
Before the vote, Bukele said adopting the cryptocurrency would bring “financial inclusion, investment, tourism, innovation and economic development” to the country.
The Salvadoran leader has also hailed bitcoin as “the fastest growing way to transfer” billions of dollars in remittances and to prevent millions from being lost to intermediaries.
Remittances from Salvadorans working overseas represent a major chunk of the economy — equivalent to roughly 22 percent of Gross Domestic Product.
In 2020, remittances to the country totaled $5.9 billion, according to official reports.
Bukele previously said the new development will make financial services accessible to the 70% of Salvadorans who do not have bank accounts and ease the transfer of remittances from abroad that make up around 20% of the country’s GDP.
The vote marks a major milestone in monetary history and could be a gamechanger for business worldwide as Bitcoin becomes a more practical asset and the Central American state a cryptocurrency hub.
The support of a nation state also could go a long way to dispel widespread skepticism of Bitcoin’s long term utility and acceptance, though fears will remain over the token’s volatility.
Meanwhile, cryptocurrency market grew to more than $2.5 trillion in mid-May 2020, according to Coinmarketcap page, driven by interest from increasingly serious investors from Wall Street to Silicon Valley.
However, bitcoin 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.
This has raised questions about whether it could ever replace traditional currency in day-to-day transactions.
Other countries and banks may begin to adopt bitcoin, or other cryptocurrency tokens, in the future. Lawmakers in a number of Latin American countries have expressed at least a casual interest in following El Salvador’s footsteps, including Brazil and Panama.