Its official Bitcoin is here to stay!
El Salvador became the first country in the world to adopt bitcoin as legal tender after Congress on Wednesday approved President Nayib Bukele’s proposal to embrace the cryptocurrency, a move that delighted the currency’s supporters.
With 62 out of 84 possible votes, lawmakers voted in favor of the move to create a law to adopt bitcoin, despite concern about the potential impact on El Salvador’s program with the International Monetary Fund.
Bukele has touted the use of bitcoin for its potential to help Salvadorans living abroad to send remittances back home, while saying the U.S. dollar will also continue as legal tender. In practice, El Salvador does not have its own currency.
“It will bring financial inclusion, investment, tourism, innovation and economic development for our country,” Bukele said in a tweet shortly before the vote in Congress, which is controlled by his party and allies.
In an idea he appeared to have developed overnight, Bukele later said he had instructed state-owned geothermal electric firm LaGeo to develop a plan to offer bitcoin mining facilities using renewable energy from the country’s volcanoes.
He said the idea was to build a bitcoin mining hub around the country’s geothermal potential. He also said that El Salvador would offer citizenship to people who showed evidence they had invested in at least three bitcoins.
The use of bitcoin will be optional for individuals and would not bring risks to users, Bukele said, with the government guaranteeing convertibility to dollars at the time of transaction through a $150 million trust created at the country’s development bank BANDESAL.
Under the law, bitcoin must be accepted by firms when offered as payment for goods and services. Tax contributions can also be paid in the cryptocurrency.
“If you go to a McDonald’s or whatever, they cannot say we’re not going to take your bitcoin, they have to take it by law because it’s a legal tender,” Bukele said in an online conversation he held with crypto-currency industry figures in parallel to the debate in Congress.
Its use as legal tender will begin in 90 days, with the bitcoin-dollar exchange rate set by the market. Bukele said the government and Central Bank did not currently hold any bitcoin.
In the capital, San Salvador, reactions were mixed, with some excited that the new currency could increase prosperity and financial options. Others were skeptical.
“How am I going to agree with this? I haven’t seen it even in photos. I know nothing about it, you need to understand your currency,” said Estela Gavidia, clutching shopping bags and recalling the loss of purchasing power many poor people suffered when the dollar was adopted in 2001.
Cryptocurrency supporters hailed the move as legitimising the emerging asset, but its impact on bitcoin regulation, taxation or adoption in other countries remains to be seen.
There were no immediate signs that other countries would follow El Salvador’s embrace of bitcoin.
“Whether this becomes the first in what becomes a trend and then snowballs, or whether this will be a blip, we will only know through history,” said Brandon Thomas, partner at advisory firm Grayline Group.
Analysts have also said the move could complicate talks with the IMF, where El Salvador seeks a more than $1 billion program.