El Salvador’s legislative assembly passed legislation making Bitcoin legal tender in the country, the first country to do so, just days after President Nayib Bukele presented the proposal at a Bitcoin conference.
Digital currency can be used in any transaction, and any business will need to accept Bitcoin payments, except for those who don’t have the technology to do so. The US dollar will also continue to be El Salvador’s currency and no one will be forced to pay in Bitcoin, according to legislation passed on Tuesday evening.
The exchange rate between the two currencies will be established by the market and all prices can be expressed in Bitcoin – although for accounting purposes the dollar will continue to be the reference currency.
The government will promote training for people to be able to transact using Bitcoin.
The Ministry of Economy noted that 70 percent of Salvadorans do not have access to traditional financial services and said the country “must authorize the circulation of a digital currency. [whose] those who value only follow free market criteria “to stimulate growth.
“The Bitcoin law is ambitious, but simple,” Bukele said on Twitter. “It is also well structured to have zero risk for those who do not want to risk. The government will guarantee convertibility at the exact dollar value at the time of the transaction ”.
The president said it will increase financial inclusion, investment, tourism, innovation and economic development.
The law will take effect 90 days after its official publication. The central bank and the regulators of the financial system will publish the implementing rules in the meantime.
Bukele’s New Ideas party holds an absolute majority in the new congress held on May 1st.
Other countries in the region, including Venezuela and the Bahamas, have introduced digital currencies, although none have adopted the same original cryptocurrency, Bitcoin.
The opposition argues the lack of study in the bill
Bitcoin, intended as an alternative to government-backed money, relies largely on complex math, data encryption – hence the term “cryptocurrency” – lots of processing power, and a distributed global ledger called the blockchain, which records all transactions. No central bank or other institution has a say in its value, which is set entirely by people trading Bitcoin and has faltered wildly over time.
The legislation has established a government trust fund that will guarantee automatic convertibility into dollars.
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Carlos Carcah, a professor at El Salvador’s Higher School of Economics and Commerce, argued that the adoption of Bitcoin as legal tender “is neither necessary nor convenient”, although he added, “as long as there is someone who accepts. payments with Bitcoin, how they accept dollars, there would be no problems ”.
He noted that Bitcoin is extremely volatile, so investors “run the risk of getting rich and the next day being poor.”
Opposition lawmaker Rodrigo Avila of the conservative Arena party complained that the legislation was not sufficiently discussed by the Legislative Assembly prior to the move. There was no testimony from economic or cybercrime experts.
The move rekindled memories of the November 30, 2000 decision to dollarize El Salvador’s economy, a move made in the middle of the night by the Arena-controlled congress.
El Salvador received about $ 6 billion in remittances from Salvadorans living abroad last year, about 16% of the country’s gross domestic product. Bukele said Bitcoin could eliminate the cost of sending that money home.