El Salvador Becomes First Country to Recognize Bitcoin as a Legal Currency
El Salvador President Nayib Bukele delivered on his promise to adopt Bitcoin as a legal currency in the country, according to a report by the BBC, making it the first country in the world to officially adopt a solely digital currency.
After a vote in the Central American country's congress, it was officially announced that "La Ley Bitcoin," or "the Bitcoin Law," had been voted into effect by a majority of 62 out of 84 votes.
El Salvador's 'ambitious, but simple' Bitcoin law
El Salvador's new law means that Bitcoin will join the US dollar as an official currency for the nation, meaning, it will be usable as payment for basic goods and services in the country.
It also means that ownership of the cryptocurrency won't be subject to capital gains tax in the country, as it is in other countries, including the US.
A su vez, traerá inclusión financiera, inversión, turismo, innovación y desarrollo económico para nuestro país.— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
Que nadie nos diga que somos muy pequeños para ser grandes 🇸🇻
In two tweets prior to the vote, Bukele wrote about the reasoning behind the country's new law. Translated from Spanish, the tweets say "the Bitcoin law is ambitious, but simple. What's more, it is structured so that those who do not want to take on any risk, take on zero risk."
"The government will guarantee the conversion rate to the exact equivalent in US dollars at the moment of each transaction," Bukele continued. "This, in turn, will bring financial inclusion, investment, tourism, innovation, and economic development to our country. Let no one tell us we are too small to [dream] so big."
A crucial step towards widespread crypto adoption?
Part of El Salvador's reason behind adopting bitcoin as a legal currency is the fact that 70 percent of Salvadorans don't have bank accounts, Bukelel pointed out while campaigning for the law.
As there are more internet users in El Salvador than people who own bank accounts, adopting Bitcoin will allow many to become financially independent.
Last year, an anonymous donor provided backing for an initiative to form Bitcoin economies in two small beach towns, El Zonte and Punta Mango, on the coast of El Salvador. This allowed cryptocurrency payments for groceries and basic goods.
El Salvador just recently also formed a partnership with digital wallet firm Strike to help build the infrastructure required for it to implement its new Bitcoin law.
A seesaw year for Bitcoin and cryptocurrencies
El Salvador's new Bitcoin law places it at the opposite end of the spectrum to China and India, both of which have recently set restrictions on digital currency trading.
Bitcoin has had a very up and down year so far. Its value skyrocketed after EV automaker Tesla announced it had made a $1.5 billion investment in the cryptocurrency and that it would accept payments in BTC.
The digital currency's value later tanked after Tesla CEO Elon Musk tweeted that BTC payments would be put on hold citing environmental concerns.
The cryptocurrency also took a hit when China's government cracked down on crypto by banning financial institutions from offering services with digital currencies. India, meanwhile, announced a ban in March for all possession of cryptocurrencies.
At the time of writing the price of Bitcoin stands at $36,234, according to CoinMarketCap. The currency had reached a record high price of $64,000 in April.
Though nothing must be taken for granted — especially in a year that saw a meme-inspired cryptocurrency soar over a $50 billion market cap — El Salvador's new law may just be one more step towards the tipping point of widespread cryptocurrency adoption.