El Salvador Becomes First Country to Adopt Bitcoin as Legal Tender

El Salvador on Tuesday became the first country to adopt bitcoin as legal tender, Reuters reports.

The country’s Congress approved the bill with 62 of 84 possible votes after President Nayib Bukele touted bitcoin as a way for Salvadorans living overseas to send remittances back home.

The US dollar will also continue to be legal tender in the country.

"It will bring financial inclusion, investment, tourism, innovation and economic development for our country,” Bukele said on Twitter.

Crypyocurrency supporters praised the move, arguing it will legitimize bitcoin.

But some analysts have warned that the move could complicate negotiations with the International Monetary Fund as El Salvador seeks more than $1 billion in assistance.

New rules:

The law will go into effect within 90 days and the value of bitcoin will be based on its market price, which can fluctuate wildly.

No one will be required to use bitcoin for transactions though the law will require businesses to accept bitcoin transactions.

The government will guarantee that bitcoin can be converted to dollars through a trust created by the country’s development bank.

Will more countries join?

The move helped bitcoin rise by 6% on Tuesday to over $35,000 after it lost more than 40% of its value earlier this month.

"The market will now be focused on adoption through El Salvador and whether other nations follow," Richard Galvin of crypto fund Digital Asset Capital Management told Reuters. "This could be a key catalyst for bitcoin over the next two to three years."

Emerging economies have increasingly warmed to cryptocurrencies. The largest number of daily bitcoin trading volume now takes place in China, Indian, and Colombia.

Many users have relied on bitcoin to send remittances between countries without costly fees.

But critics worry that bitcoin helps facilitate money laundering and other illegal uses.

 

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