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Bitcoin is now legal tender in El Salvador

Most lawmakers approved Salvador President Naib Bukele’s proposal, which would allow bitcoins to be used as legal tender in the country along with the US dollar.

The law states that “all economic agents accept bitcoin as a method of payment when it is offered by the buyer of a good or service.” He also says that tax payments can now be made in bitcoin.

Bukele, 39, is a right-wing populist who rose to power in 2019. He previously said that El Salvador would partner with digital finance company Strike to create the infrastructure needed to support the use of bitcoin as the official currency.

In a tweet before the vote, Bukele said using bitcoin as a legal tender would promote financial inclusion, tourism, innovation and economic development. El Salvador is the smallest country in Central America, and although it quickly recovered from the coronavirus pandemic, its economy was hit hard last year, according to the World Bank.

The future of digital currencies

Although central banks around the world have reacted fascinatingly to bitcoin, they have been reluctant to accept cryptocurrencies because of their extreme volatility. Bitcoin, for example, collapsed more than half its value earlier this year after the rocket reached a record high of $ 60,000. Other, less traded cryptocurrencies are even more volatile, trading up and down like shaky – often based on speculation or mem tweets from Tesla (TSLA) Chief Executive Officer Elon Musk.

However, the growing popularity of crypto has prompted the US Federal Reserve to look hard at the restrictions on the old-fashioned dollar – especially around payments and remittances that can take days. Bitcoin transactions happen almost instantly.

Cryptocurrencies also do not require a bank account. Instead, they are kept in digital wallets. This can help people in poorer communities – such as many in El Salvador, but also in minority communities in the United States – to gain greater access to their finances.

Lael Brainard, a member of the Federal Reserve’s board, filed a lawsuit last month over a secure, bank-backed digital currency that could create a more efficient payment system and expand financial services for Americans not served by traditional banks. .

In May, Federal Reserve Chairman Jerome Powell announced that the central bank would publish a paper this summer outlining the board’s thoughts on the benefits and risks of the digital dollar.

Although cryptocurrencies such as bitcoin are digital, the central bank’s digital currency would be radically different from the current cryptocurrency because it would still be controlled by a central bank rather than a decentralized computer network.

– Stefano Pozhebon, George Engels and Alison Morrow contributed to this report

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