Recently El Salvador has become the first country in the world to officially classify Bitcoin as legal currency.
Congress approved President Nayib Bukele’s proposal to embrace the cryptocurrency, with a supermajority of the nation’s legislature voting (62 out of 84 possible votes) in favor of this proposal on June, 10.
“It will bring financial inclusion, investment, tourism, innovation and economic development for our country,” Bukele said in a tweet shortly before the vote in Congress. This sensible step will help the 70% of Salvadorans without bank accounts join the 21st-century financial system. Bukele also said that Bitcoin will facilitate remittance transfers and considerably reduce transaction costs. The fees that migrants must currently pay to send their money home are scandalously high, despite many calls by the United Nations and the G20 to reduce them. Reducing the fees to just 2% could increase remittances by as much as $16 billion per year.
The so-called Bitcoin law means that every business must accept Bitcoin as legal tender for goods or services, unless it is unable to provide the technology needed to execute transaction processing. At the same time, the law does not prohibit merchants from accepting payments in other currencies, like USD, EUR, Honduran lempiras etc. The U.S. dollar also remains legal tender under the law, giving Salvadorans the rare opportunity to pay their taxes and debts in one of two currencies, neither of which is controlled by the Salvadoran government. El Salvador will promote training and mechanisms to allow easier access to bitcoin transactions. The country has even gone as far as to promise $30 in Bitcoin to each citizen that will download and sign up for the country’s new cryptowallet, Chivo.
What’s even more incredible is that Paraguay will most likely be following El Salvador’s steps and seems on its own path to officially become a Bitcoin supportive country. The country might be making moves to adopt the asset as a national currency. For one, the American University of Paraguay will accept tuition payments in bitcoin, as well as other cryptocurrencies, starting from August 1, 2021.
On crypto Twitter, some financial and legal observers described the new law acceptance as a remarkable accomplishment and a real game changer, while some others raised concerns about the cryptocurrency’s volatility.
Bitcoin will be considered a legal form of currency in El Salvador, alongside the country’s primary currency, the U.S. dollar, after September, 7.