El Salvador adopted Bitcoin as legal tender by passing a law yesterday, making it the first country to do so.

                By                    Yaёl Bizouati-Kennedy

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“The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress, 62 out of 84 votes! History!” President Nayib Bukele tweeted yesterday.

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,” according to the text of the law that Bukele also posted on Twitter.

— Nayib Bukele ???????? (@nayibbukele) June 9, 2021

According to the law’s articles, the exchange rate between Bitcoin and the United States dollar will be freely established by the market and the USD will be used as the reference currency.

In addition, prices may be expressed in Bitcoin and tax contributions can be paid in Bitcoin.

While she adds that it’s too early to know whether this is a watershed moment for digital assets, she says that “El Salvador has captured global attention, despite the risk to individuals due to the volatility of Bitcoin as an asset class, and [will] be watching closely to see what happens from here.”

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The law also notes that exchanges in Bitcoin will not be subject to capital gains tax, just like any legal tender and that every economic agent must accept Bitcoin as payment when offered to them by whoever acquires a good or service.

“Without prejudice to the actions of the private sector, the state shall provide alternatives that allow the user to carry out transactions in Bitcoin and have automatic and instant convertibility from Bitcoin to USD if they wish. Furthermore, the State will promote the necessary training and mechanisms so that the population can access bitcoin transactions,” according to the law.

“Particularly of interest is the mandate that merchants cannot refuse Bitcoin payments. Curious to see how the ruling helps build the infrastructure needed for 6.5 million Salvadorians to be connected to Bitcoin,” she adds.

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According to the text of the law, “approximately 70% of the population does not have access to traditional financial services; it is the obligation of the state to facilitate the financial inclusion of its citizens in order to better guarantee their rights; in order to promote the economic growth of the nation, it is necessary to authorize the circulation of a digital currency whose value answers exclusively to free-market criteria, in order to increase national wealth for the benefit of the greatest number of inhabitants.”

The law goes on to state that “according to the previous considerations, it is essential to issue the basic rules that will regulate the legal course of Bitcoin.”

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Last updated: June 9, 2021