El Salvador has become the first country to officially recognizes Bitcoin as legal tender. A supermajority of lawmakers in the Latin American country’s Legislature voted by the Bitcoin Law.
In a Wednesday vote, El Salvador’s Congress voted by a supermajority in favor of the president’s proposal for the Central American nation to adopt Bitcoin as legal tender.
As president of El Salvador Nayib Bukele tweeted, 62 against 19 members of the legislature voted in favor of the law with three abstentions.
Soon after the vote, Bitcoin’s price rose 5% to $34,239.
Before the Wednesday Congress session, president Bukele announced on Twitter sending the law to lawmakers.
“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,” reads in the bill.
Prices can be shown in Bitcoin now, taxes can be paid with the digital currency, and exchanges in Bitcoin will not account under the capital gains tax.
The exchange rate with the U.S. dollar, El Salvador’s official currency, will be free-market established.
The bill also stated that the government will “promote the necessary training and mechanisms so that the population can access Bitcoin transactions.” As known, about 70% of El Salvador’s population does not have access to regular financial services. That’s why Bitcoin is seen as a way to establish wider financial inclusion.
Before, Bukele provided some details of his vision in a Twitter Space conversation on Wednesday hosted by Castle Island Ventures and Coin Metrics. As he said, users won’t necessarily have to use a government wallet.
President also said that the country was coming up with a new bill that would grant permanent residency to any investor of 3 BTC into El Salvador’s economy.
The bill will make Bitcoin acceptance mandatory for all businesses for goods or services, but the state will provide support for companies that aren’t want to take the risk caused by cryptocurrency volatility.
According to Bukele, the government will set up the trust fund, holding about $150 million in dollars, at the Development Bank of El Salvador. It will instantly convert Bitcoin to U.S. dollars to absorb merchants’ risk.
“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,” he said.
President Bukele conveyed the Bitcoin Law to the legislature after the announcement about El Salvador’s partnership with digital wallet company Strike to build the modern financial infrastructure in the country by Bitcoin technology.