El Salvador becomes the first country to adopt bitcoin as legal tender
El Salvador Congress authorized President Nayib Bukele on the proposal to hold the cryptocurrency. It was with 62 out of 84 possible votes on Tuesday night last week. The president said that the government had made history. This move would make it easier for Salvadoreans living abroad to send money home
What does all this mean?
The new law means that each business must evaluate Bitcoin as legal tender for goods or services. Meaning, people in El Salvador will be able buy and sell daily goods through bitcoin However, it is incapable to provide the technology required to do the transaction. So, now Bitcoin will become legal tender, alongside the US dollar within 90 days.
El Salvador's economy relies to a great extent on remittances, or money sent home from abroad. It will help to make up just about 20% of the country's gross domestic product (GDP). More than two million Salvadoreans live outside the country, but they proceed to keep close ties to their place of the birth, sending back more than $4bn (£2.8bn) each year.
The bill that was just passed will mandate all businesses to acquire bitcoin for goods or services. Though the government will act as a safeguard for entities that aren’t willing to take on the risk of a volatile cryptocurrency, the president said.
A trust that the government will acquire at the Development Bank of El Salvador is to immediately convert bitcoin to U.S. dollars. It will adopt merchants’ risk, he stated. It will hold approximately $150 million in dollars.
The Development Bank’s trust fund would sell a few of the bitcoin it acquired for dollars to refill the fund. Government officials from El Salvador will run into the International Monetary Fund in the coming days to talk about the plan.
Bukele also communicated that the government may boost bitcoin mining. El Salvador had already been hoping to attract businesses with extra geothermal energy, and the government isn’t generally looking to the bitcoin mining industry to fill that demand. He further said that this is one such sector that could benefit.
CBW - External Analyst