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El Salvador approves the first bitcoin law as legal tender

Bitcoin banners appear in front of a small restaurant on El Zonte Beach in Chiltiupan, El Salvador on June 8, 2021. REUTERS / Jose Cabezas / File Photo

El Salvador became the first country in the world to officially accept bitcoin as legal tender after Congress approved President Naib Bukele’s proposal to accept the cryptocurrency.

With 62 out of 84 possible votes, a majority of MPs voted in favor of the initiative to create a law that will officially adopt bitcoins, despite fears of a potential impact on El Salvador’s program with the International Monetary Fund. Read more

Bukele advertised the use of bitcoin because of its potential to help Salvadorans living abroad send remittances back home, while saying the US dollar would also continue as legal tender.

“This will bring financial inclusion, investment, tourism, innovation and economic development to our country,” Bukele tweeted shortly before the vote in Congress, which is controlled by his party and allies.

He added that the use of bitcoin, the use of which will not be mandatory, will not pose risks to consumers. Its use as legal tender will take effect in 90 days.

“The government will guarantee convertibility to the exact value in dollars at the time of each transaction,” Bukele said.

El Salvador’s dollarized economy relies heavily on money returned by workers abroad. World Bank data show that remittances to the country amount to nearly $ 6 billion, or about a fifth of GDP in 2019, one of the highest ratios in the world.

Experts say the move to bitcoin could complicate negotiations with the IMF, where El Salvador is looking for a program worth more than $ 1 billion. Read more

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