- El Salvador's president has announced that bitcoin will become legal tender in the country, making the country the first to do so
- Lawmakers in the Central American nation's congress enacted a bill allowing the notoriously volatile digital currency to be used for a variety of purposes
- They include property purchases and tax payments, but it remains unclear how the country plans to implement bitcoin as a functioning currency
- El Salvador - a small nation where four out of 10 people live in poverty - uses the US dollar as its main currency
El Salvador’s legislative body passed a law early Wednesday, June 9, that will make the country the first in the world to deem bitcoin legal tender.
The designation allows bitcoin, the world’s largest cryptocurrency by market value, to be used to pay taxes.
El Salvador president, 39-year-old Nayib Bukele, announced the Bitcoin Law in a tweet, saying a majority of 62 out of 84 lawmakers approved the bill, which he proposed just last week.
"The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress. 62 out of 84 votes!" he tweeted.
Businesses would also be obligated to accept bitcoin for payment, though those without the ability to process the payments would be exempt, according to the bill.
Converting bitcoin into other currencies will no longer be subject to capital gains tax.El Salvador’s government said it would set up a trust at the Development Bank of El Salvador to allow the automatic convertibility of bitcoin to US dollars.
The Latin American country, one of the region’s poorest, has struggled over the years to manage its finances and has used the US dollar as its official currency since 2001.
El Salvador’s government said it hoped the use of bitcoin 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.
It is, however, not clear how practical it will be for El Salvador to adapt its economy to bitcoin.
Fluctuating market growth
The cryptocurrency market grew to more than $2.5 trillion in mid-May 2020, according to the Coinmarketcap page. This was driven by interest from increasingly serious investors from Wall Street to Silicon Valley.
Between the beginning of 2020 and a peak in mid-April of $64,870, the price of bitcoin gained nearly 800%, but since then, it has fallen in value by more than 50%.
Its price has fallen sharply towards a symbolic $30,000 threshold it has not crossed since January, dragging other cryptocurrencies in its wake.
Elon Musk's tweets
Briefly News earlier reported Musk had been a big supporter of cryptocurrencies, helping rally the prices of digital coins, including bitcoin, several times in the past year.
His tweets and comments around cryptocurrency often send the prices soaring or plunging.
The price of bitcoin jumped about 4% on May 24, 2021, after the Tesla CEO tweeted that he was having active discussions regarding the sustainability of the digital coin.
In February 2021, Tesla announced it had bought $1.5 billion worth of bitcoin.
It also said it would start accepting payments in bitcoin in exchange for its products “subject to applicable laws and initially on a limited basis.
However, In May, he said Tesla would stop accepting bitcoin as a payment method due to concerns over its energy usage, shaving hundreds of billions of dollars in value off the entire crypto market in a single day.
Bitcoin’s price also fell Friday, June 4, after the tech guru posted a tweet suggesting he had fallen out of love with the world’s top cryptocurrency.
The cryptocurrency recovered slightly but remained in the red after Square CEO Jack Dorsey tweeted that the digital payments company is considering creating a hardware wallet for bitcoin.
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