El Salvador made history on Wednesday, as the country’s legislature passed a law making Bitcoin legal tender in the Central American nation.
“The designation allows bitcoin, the world’s largest cryptocurrency by market value, to be used to pay taxes. Businesses would also be obligated to accept bitcoin for payment, though those without the ability to process those payments would be exempt, according to the bill. Converting bitcoin into other currencies will no longer be subject to capital-gains tax,” explained The Wall Street Journal. “To allow the automatic convertibility of bitcoin to U.S. dollars, El Salvador’s government said it would set up a trust at the Development Bank of El Salvador. The Latin American country, one of the region’s poorest, has struggled over the years to manage its finances and has used the U.S. dollar as its official currency since 2001.”
According to El Salvador’s government, the use of the cryptocurrency could fuel “financial inclusion,” with the bill noting that “70% of its population doesn’t have access to traditional financial services.”
The Bitcoin Law, which comes into effect in 90 days, was supported by a “supermajority” in El Salvador’s Congress, with the bill receiving 62 votes out of an available 84. President Nayib Bukele described the move as “History!”
“The [Bitcoin Law] has been approved by a supermajority in the Salvadoran Congress,” tweeted Bukele. “62 out of 84 votes!”
The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress.
62 out of 84 votes!
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
“The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out,” the law reads, as reported by CNBC, with the cryptocurrency’s exchange rate with the U.S. dollar — El Salvador’s official currency — being “freely established by the market.”
“Necessary training and mechanisms so that the population can access bitcoin transactions” would also be provided by the government.
The notoriously volatile cryptocurrency has fluctuated in price in recent months, dropping by almost 50% since an April high of $64,829.14, according to CoinDesk.
One factor apparently driving such turbulence is China’s apparent assault on the cryptocurrency market as the communist regime looks to develop its own state-regulated “digital currency.”
In what was described by a “Judgement Day for crypto,” the Chinese government recently “blocked multiple crypto-related accounts on Weibo, the Chinese blogging platform, with more steps expected to follow, ‘including linking illegal crypto activities in China more directly with the country’s criminal law.’”
Last month, the actions of Chinese authorities were swiftly followed by a crash in the cryptocurrency market, with the market cap losing nearly $1 trillion after the government banned “financial and payment institutions from providing cryptocurrency services,” while warning “investors against speculative crypto trading.”
In addition, following Tesla CEO Elon Musk’s announcement in mid-May that “the electronic car company would suspend vehicle purchases with Bitcoin,” the price of Bitcoin plunged, with up to $365 billion “wiped” off the entire cryptocurrency market.