El Salvador becomes the first country to make bitcoin as legal tender

El Salvador becomes the first country to make bitcoin as legal tender

A recent proposal by Nayib Bukele, President of El Salvador, to promote cryptocurrency has reportedly received congress approval. As per the proposal, bitcoin would now be used as legal tender in the country.

According to reports, President Bukele presented the proposal at a Bitcoin conference last weekend. The approval of the proposal would now allow the use of cryptocurrency for any transaction in El Salvador, except if a business is incapable of providing the necessary technology.

Notably, the adoption of bitcoin in the region would not affect the use of US dollar, which would remain the nation’s official currency. President Bukele stated that by becoming the first country to use bitcoin as legal tender, his government had made history.

Evidently, other South American countries, including the Bahamas and Venezuela, have adopted digital currencies. However, none of these regions have implemented bitcoin, which was the original cryptocurrency.

President Bukele believes that the move would accelerate financial inclusion, economic development, investment, tourism, and innovation in the country.

The law is slated to come into effect 90 days from its official publication, as per reports. Meanwhile, the Central Bank, along with financial regulators, would publish implementing rules.

Bitcoin would become an alternative to state-backed currency and any central bank or financial institution would not have control over its value. Its value is supposedly set by people trading it and the exchange rate between bitcoin and the US dollar in the region would be fixed by the market.

The new legislation has apparently created a government trust fund, which would guarantee the currency’s automatic convertibility to US dollars.

Carlos Carcah, professor at Superior School of Economics and Business, El Salvador, claimed that adopting bitcoin as legal tender is “not necessary, nor convenient”. He added that the cryptocurrency is extremely volatile, thus, investors are at risk of going from ‘becoming rich one day and then poor the next day’.

Reportedly, El Salvadore’s economy depends on the money that people living abroad send home, which contributed to 16% of the country’s GDP last year. President Bukele stated that bitcoin could cut the costs of sending money home.

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Sunil Jha

Sunil Jha has been a part of the content industry for close to two years. Having previously worked as a voice over artist and sportswriter, he now focuses on writing articles for, across a slew of topics, ranging from technology to trade and finance. With a business-oriented educational background, Sunil brings forth the expertise of deep-dive research and a strategic approach in his write ups.