El Salvador has become the first country to formally adopt Bitcoin as legal tender after President Nayib Bukele said congress approved his landmark proposal.
In an early Wednesday vote, a supermajority of the nation’s legislature voted in favour of President Nayib Bukele’s proposal for the Latin American nation to adopt bitcoin. Sixty-two members of the legislature voted in favour of the bill, with 19 opposed and three abstentions.
The president had previously said that Bitcoin will help counter the country’s low banking penetration rate and cut the cost of sending remittances. Such transfers, mainly from Salvadorans working in the U.S., surged to a record of nearly $7 billion over the 12 months.
In a Twitter Space conversation early Wednesday morning, President Nayib Bukele said users wouldn’t necessarily have to use a government wallet. He also added that the country is designing a new law that would grant permanent residency to any individual who invests three BTC into El Salvador’s economy.
The bill will mandate all businesses to accept bitcoin for goods or services; however, the government will act as a backstop for entities that aren’t willing to take on the risk of a volatile cryptocurrency, the president said.
The government said it will set up a trust at the Development Bank of El Salvador to instantly convert bitcoin to U.S. dollars to assume merchants’ risk, which will hold about $150 million in dollars.
“If there’s an ice cream parlor, he doesn’t really want to take the risk, he has to accept bitcoin because it’s a mandated currency, but he doesn’t want to take the risk of convertibility, so he wants dollars deposited in his banking account, when he sells the ice cream, he can ask the government to exchange his bitcoin to dollars. Of course, he can do that in the markets also, but he can ask the government to do it immediately.” President Nayib Bukele
Government officials are set to meet with the IMF to discuss the country’s new bitcoin law and other issues on Thursday.
However, the president said he had explained to the IMF that his country’s new adoption of the cryptocurrency as legal tender would not change El salvador’s macroeconomics.
Bitcoin Gains Following El Salvador’s New Laws
Following the announcement, Bitcoin, the world’s largest cryptocurrency by market capitalization, jumped, gaining at 7.36 % as of press time.
The price of bitcoin jumped from $32,557 at 02:00 UTC (10 p.m. ET Tuesday) to $36,890 by 17:20 UTC (1:20 p.m. ET) Wednesday, a 13.3% gain.
As of 10.30 A.M East African Time, bitcoin was exchanging hands at $ 36,853.28, a 7.36 % gain.