El Salvador became the first country to adopt Bitcoin as legal tender after lawmakers voted to approve a proposal by the country’s President Nayib Bukele.
The Central American country’s Congress voted on the proposal after the so-called Bitcoin Law was sent by Bukele, 39, to lawmakers on Wednesday, receiving 62 out of 84 of the legislature’s votes.
“The purpose of this law is to regulate Bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out,” the law says.
Prices for goods can now be shown in Bitcoin figures. Residents can also pay taxes using the digital currency, and exchanges in Bitcoin will not be subject to capital gains tax.
PRESIDENT OF EL SALVADOR TO INTRODUCE BILL MAKING BITCOIN LEGAL TENDER
El Salvador’s official currency is the U.S. dollar. According to the new law, the exchange rate with USD “will be freely established by the market.”
Roughly 70% of the country’s population does not have access to traditional financial services, according to text cited in the law. Making Bitcoin a legal form of tender is viewed as a way to increase financial inclusion.
The passage follows Bukele’s announcement last week, where he revealed El Salvador reached a partnership with digital wallet company Strike in order to help build the country’s Bitcoin-backed financial infrastructure.
Bitcoin’s price rose 5% to $34,239.17 shortly after the vote, though the present price is still drastically lower than its record value of roughly $64,000 in April.
The law is expected to go into effect in 90 days.
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Despite the tremendous drop in value, Bitcoin is still up over 230% in the past 12 months, largely due to rising interest by institutional investors, such as Tesla or Square, which have bought vast quantities of the cryptocurrency.
