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El Salvador, first country to approve bitcoin as legal tender

  • Published at 05:27 pm June 9th, 2021
Bitcoin
A representation of virtual currency Bitcoin is seen in this illustration Reuters

Cryptocurrencies have soared in popularity due to their use as a store of value

Bitcoin is to become legal tender in El Salvador, the country's president said, making it the first nation to adopt a cryptocurrency for everyday use.

Lawmakers in the Central American nation's Congress passed a bill on late Tuesday that will eventually allow the famously volatile digital currency to be used for many aspects of daily life, from property purchases to tax contributions.

"The #BitcoinLaw has just been approved by a qualified majority" in the legislative assembly, President Nayib Bukele tweeted after the vote on late Tuesday.

"History!" the president added.

The 39-year-old leader said a majority of 62 out of 84 lawmakers approved the bill, which he proposed just last week. 

The law passed with the support of Bukele's allies despite minority opposition parties -- who had criticized the speed of the vote -- refusing to back it.

Cryptocurrencies have soared in popularity due to their use as a store of value, the relative anonymity they offer users and wild price fluctuations that present opportunities for greater profits than investing on the regular stock exchanges of the world.

The volatility of bitcoin -- currently priced at $33,814 -- and its murky legal status have raised questions about whether it could ever replace traditional currency in day-to-day transactions.

But El Salvador -- a small nation where four out of 10 people live in poverty -- has turned to the top crypto asset that has been backed by billionaires like Elon Musk and large financial companies such as PayPal in a bid to boost its remittance-reliant economy.

El Salvador's main currency is the US dollar and it remains unclear how the country plans to implement bitcoin as a functioning currency.

Yet the Salvadoran leader has hailed the virtual currency as "the fastest growing way to transfer" billions of dollars in remittances and to prevent millions from being lost to intermediaries.

Remittances from Salvadorans working overseas represent a major chunk of the economy -- equivalent to roughly 22% of Gross Domestic Product.

In 2020, remittances to the country totalled $5.9 billion, according to official reports.

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