A majority of 62 of 84 lawmakers approved the bill, which President Bukele proposed last week.
El Salvador approved a proposal by President Nayib Bukele for a law to classify Bitcoin as a legal tender, making the Central American nation the first in the world to fail.
A majority of lawmakers voted in favor of the initiative late Tuesday to create a law that will formally embrace cryptocurrency, despite concerns about the potential effect on El Salvador’s program with the International Monetary Fund.
“The #BitcoinLaw has just been approved by a qualified majority” in the legislative assembly, President Nayib Bukele tweeted after the vote in the assembly.
– Legislative Assembly (@AsambleSV) June 9, 2021
Translation: With 62 votes, the legislative plenary session approves the #LeyBitcoin [that allows] El Salvador to adopt #Bitcoin as legal tender. #Thenewassembly continues to make history ,! a tweet from the Legislature said.
Bukele announced the use of Bitcoin for its potential to help Salvadorans living abroad send home remittances, saying the U.S. dollar will continue as a legal tender.
“It will bring financial inclusion, investment, tourism, innovation and economic development to our country,” Bukele said in a tweet shortly before the vote.
He added that the use of Bitcoin, which use will be optional, would not bring any risks to users. Its use as legal tender will take effect in 90 days.
“The government will ensure convertibility to the exact value in dollars at the time of each transaction,” Bukele said.
El Salvador’s dollarized economy depends heavily on money sent back by citizens working abroad.
World Bank data showed remittances to the country at nearly 2019 billion dollars, about one-fifth of GDP, in 2019, one of the highest ratios in the world.
Experts say the move to Bitcoin could complicate discussions with the IMF, where El Salvador is seeking a more than $ 1 billion program.
Alina Carare, head of the IMF mission in El Salvador, said late Monday that the fund “will follow the news and get more information as we continue our consultations with the authorities.”
Carlos de Sousa, portfolio manager at Vontobel Asset Management, said the push for Bitcoin seemed underestimated with Bukele shooting potentially at his feet, making it more difficult to grow tax revenues.
“Cryptocurrencies are generally a very easy way to avoid taxation and a very easy way to simply avoid authority because it’s a completely decentralized system, you can do money laundering, you can do tax evasion and so on,” he said.
A cryptocurrency is a digital form of money which can be used to pay for any online transactions.
As with “real” coins, one, 10, or millions of Bitcoins can be owned. Unlike real currencies, cryptocurrencies exist only online and are not supported by any government or central bank.
Crypt Devotees say currencies represent the economy of the future. But in the end, their value depends on their limited supply and the number of people who hunt them.
The cryptocurrency market grew to more than $ 2.5 trillion in mid-May last year, according to the CoinMarketCap page, driven by the interest of increasingly serious investors from Wall Street to Silicon Valley.
But the volatility currency – currently at a price of $ 36,127 – and its turbulent legal status have raised questions about whether it will ever replace the currency trusted in day-to-day transactions.