On June 9, El Salvador’s legislature approved the proposal to adopt Bitcoin as a national legal currency, therefore, becoming the world’s First country to approve Bitcoin as Legal Tender. The Salvadoran legislature approved the proposal moved by President Nayib Bukele with a supermajority of 62 votes out of 84.
The enactment passed will protect crypto currency with unrestricted liberating power, and permits its limitless use in any exchange.
The designation allows Bitcoin to be utilized to buy goods and pay taxes and bank loans. Businesses would be required to accept Bitcoin for payment, with the Bitcoin-dollar exchange rate set by the market.
President Bukele tweeted that this law will bring financial inclusion, investment, tourism, innovation, and economic development in El Salvador’s economy by integrating the national and international economy through incentives and technology.
He further added that the use of Bitcoin will be discretionary and would not bring risks to users. The use of Bitcoin as a legal tender will go into law in 90 days and the government will guarantee the convertibility to the exact value in dollars at the moment of each transaction.
A proposal of permanent residency for individuals who launch Bitcoin-related ventures in El Salvador will be given. Furthermore, Bitcoin will be accepted in all transactions, yet it will not replace El Salvador’s current official currency which is the US dollar.
But IMF’s spokesman Gerry Rice is skeptical about this and thinks that adoption of Bitcoin as legal tender may imply a series of risks and regulatory challenges. He even said that effective regulatory measures are very important to deal with such risks.
He added that, “An IMF team is conducting virtual meetings with El Salvador on its Article IV review of the country and a potential credit program “including policies to strengthen economic governance”
All the developments are being carefully analyzed as the adoption of Bitcoin as legal tender raises a number of macroeconomic, financial, and legal issues that require cautious assessment.
By team SLC