El Salvador has officially become the first country in the world to adopt Bitcoin as legal tender after the proposal was approved in Congress.
President Nayib Bukele declared that his bill achieved a “supermajority” after receiving 62 of the 84 votes available.
However, concerns continue to linger that this could affect ongoing negotiations with the International Monetary Fund concerning a $1 billion program for the Central American nation.
A 90-day period of implementation will now commence, and this will include promoting “the necessary training and mechanisms so that the population can access Bitcoin transactions.”
One crucial bit of the Bitcoin Law states that “every economic agent must accept Bitcoin as payment when offered to him by whoever acquires a good or service” — indicating that there’s going to be some rather big changes for El Salvador’s business community.
However, proponents have argued that this will be a good thing for merchants, as they’ll be subject to lower processing fees than what credit card providers charge.
How It Works
Bitcoin’s status as legal tender means that it will be treated exactly like the U.S. dollar is — and El Salvadorans who sell their crypto won’t be subject to capital gains tax. However, the BTC/USD exchange rate will fluctuate in line with the free market.
One particular challenge could concern the fact that prices for everyday items will now need to be expressed in Bitcoin.
Businesses operating in remote areas of the country, or those who don’t have the technological wherewithal to accept crypto, are going to be exempt.
Speaking to Nic Carter on Twitter Spaces, President Bukele revealed that permanent residency will be offered to anyone who invests 3 BTC into the country’s economy — and a special trust is going to be set up that will be able to instantly convert Bitcoin into dollars.