El Salvador is the first nation in the world to recognize bitcoin as legal money. The Bitcoin Law was passed by a supermajority of lawmakers in the Central American country’s Congress. The Bitcoin Law was passed by a “supermajority” of lawmakers in the Central American country’s Congress, with 62 out of 84 votes in favor.
Shortly after the vote, the price of bitcoin jumped 5% to $34,239.17. President Nayib Bukele had forwarded the bill to Congress for a vote earlier in the day.
Bitcoin as Legal Tender
Prices may now be shown in bitcoin, tax donations may be made in bitcoin, and bitcoin exchanges will be exempt from capital gains tax. According to the head of the Digital Chamber of Commerce, bitcoin volatility will reduce over time.
Bitcoin is infamous for its extreme price fluctuations, which have led some detractors to conclude that it is unfit to be used as a currency. It’s still unclear how El Salvador will use bitcoin as legal cash in the long run.
The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
According to the proposed legislation, the exchange rate with the US dollar “would be freely decided by the market.” The US dollar is El Salvador’s current national currency.
The state would also “promote the required skills and methods so that the populace may access bitcoin transactions,” according to the legislation.
Bitcoin’s Eventful Year
According to the Bitcoin Law, around 70% of El Salvador’s population lacks access to conventional financial institutions. The cryptocurrency is seen as a means of expanding financial inclusion.
After announcing last week that El Salvador has formed a collaboration with digital wallet firm Strike to construct the country’s contemporary financial infrastructure utilizing bitcoin technology, Bukele filed the bill to Congress.
According to CoinDesk statistics, bitcoin touched a record high of $64,829.14 in April, but has since plunged by almost half. It’s still up more than 230 percent in the past year. Several explanations have been ascribed to this growth, including increased interest from institutional investors and huge corporations like Tesla and Square in purchasing bitcoin.
El Salvador’s Interest in Bitcoin
70% of El Salvador’s population lacks a bank account, while money sent home by migrants accounts for around 20% of the country’s GDP. Since its inception in March, the Strike app has onboarded 20,000 new El Salvadorians every day.
He regarded Strike’s drafting of the bill as the next step in a partnership with El Salvador’s government.
Bukele has a sizable following, and his populist Nuevas Ideas party just won a landslide victory. The new legislature, on the other hand, has recently been chastised for dismissing the attorney general and senior judges.
As a consequence of the action, the US Agency for International Development pulled funds from El Salvador’s national police and a public information agency, transferring funds to civil society groups.
El Salvador is one of just a few nations in the world that uses the US dollar as its official currency. However, as a consequence of El Salvador’s recent modifications to its legal system, tensions between the Central American nation and the United States have recently risen.
In May, the United States Agency for International Development (USAID) stated that monies from El Salvador’s official institutions (including the Attorney General’s office) will be diverted to local human rights organizations.