Despite the recent struggles that Bitcoin was facing, the cryptocurrency received a strong push by the Central American Nation, El Salvador on Wednesday as the country is going down in history as the first country in the world to adopt Bitcoin (BTC) as legal tender.
This initially came as a proposal by the President Nayib Bukele to favor cryptocurrency over fiat currency. With 62 out of 84 possible votes, lawmakers voted in favor of the move to create a law to formally adopt BTC as legal tender of the country. Where the President tweeted stating the results.
President Bukele introduced this initiative to use of BTC was due to its potential to help Salvadorans living abroad to send remittances back home, while saying the USD will also continue as legal tender of the country. Shortly before the voting began Bukele stated in a tweet, “It will bring financial inclusion, investment, tourism, innovation and economic development for our country.”
El Salvador’s government said it hoped the use of BTC would increase financial inclusion, writing in the bill that 70% of its population doesn’t have access to traditional financial services. The legislation will take effect in 90 days. The new law means every business must accept BTC as legal tender for goods or services, unless it is unable to provide the technology needed to do the transaction.
According to Reuters report regarding the topic, the use of BTC will be optional for individuals and would not bring risks to users, Bukele said, with the government guaranteeing convertibility to dollars at the time of transaction through a trust created at the country’s development bank BANDESAL.
The law also states that prices can be expressed in bitcoin, taxes can be paid in the cryptocurrency and “every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.” As well, the exchange rate between bitcoin and the U.S. dollar will be “freely established by the market,” the document read.
El Salvador’s economy relies highly on remittances, or money sent home from abroad, which make up around 20% of the country’s gross domestic product (GDP). More than two million Salvadoreans live outside the country, but they continue to keep close ties to their place of birth, sending back more than $ 4 Billion each year, stated BBC.
Bitcoin BTCUSD, 7.65% will officially become legal tender 90 days after appearing in the country’s Diario Oficial, in which all documents ordered by law are published. The cryptocurrency was trading modestly higher at $ 34,112. Bitcoin has lost about 37% in the space of a month and 39% over three months, well off its highs of over $ 64,000 reached in April, states Market Watch which is a financial news website.
Even though the cryptocurrency was designed to be a viable method of payment, it has struggled to meet that goal due to its high volatility. Consumers and businesses are reluctant to receive payments in a currency whose value could swing sharply from day to day.
Many nations are concerned about this latest tend of adopting cryptocurrency or introducing digital currency as a means of payment. Where Venezuela in 2018 launched its own cryptocurrency tied to its oil reserves and Bahamas introduced their own digital currency by providing improved access to banking facilities, while nations such as China is in fore front of creating a Central Bank Digital Currency (CBDC). With all these novelties going on, crypto market future appears promising.
