- El Salvador is the world’s first country to recognize Bitcoin as legal tender
- The proposal was introduced by the country’s president Nayib Bukele
- Citizens will be able to pay taxes with Bitcoin and BTC will be exempt from capital gains tax
El Salvador passes bill to accept Bitcoin as legal tender
El Salvador is now the first country in the world to recognize Bitcoin as legal tender. 62 (out of a total 84) deputies in the Legislative Assembly voted in favor of the proposal, which was introduced by the country’s president Nayib Bukele. The proposal was expected to pass as Bukele’s populist Nuevas Ideas party controls 56 of the 84 seats in the Legislative Assembly.
The first article of the “Bitcoin Law” reads:
“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 Bukele, about 70% of El Salvador’s citizens cannot access financial services, which would make Bitcoin a way to bolster financial inclusion.
Bitcoin’s status as legal tender in El Salvador will go into effect in 90 days. It will mean that Bitcoin will be accepted as payment for all monetary debt, including taxes. While the use of Bitcoin will be fully optional, companies offering goods and services will need to have Bitcoin as an available payment option. According to the bill, the state will work towards providing education and resources to make Bitcoin transaction accessible to citizens.
Bitcoin’s designation as legal tender will also mean that it will be excluded from capital gains tax.
Bitcoin will join the US dollar as the two accepted currencies in El Salvador. In 2001, the country replaced its previous Salvadoran colón currency with the US dollar. BANDESAL, the development bank of El Salvador, will offer a service for conversions between Bitcoin and the US dollar.
The news was accepted very positively by the Bitcoin community, with many people seeing it as a pivotal event in Bitcoin’s history. Salvador’s recognition of Bitcoin as legal tender might have also improved market sentiment, as Bitcoin is up about 6.4% in the last 24 hours.
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