El Salvador has approved legislation making the cryptocurrency Bitcoin legal tender in the country, the first to do so, only days after President Nayib Bukele made the proposal at a Bitcoin conference.
itcoin can be used in any transaction, and any business will have to accept payment in the digital currency with the exception of those lacking the technology to do so.
El Salvador’s official currency will continue to be the US dollar and no one will be forced to pay in Bitcoin, according to the legislation.
The exchange rate between the two currencies will be established by the market and all prices will be able to be expressed in Bitcoin – though for accounting purposes, the dollar will continue to be the currency of reference.
The government will promote training for people to be able to carry out transactions using Bitcoin.
El Salvador’s Economy Ministry noted that 70pc of Salvadorans do not have access to traditional financial services and it said the country “needs to authorise the circulation of a digital currency who value exclusively follows free market criteria” to stimulate growth.
“The Bitcoin law is ambitious, but simple,” Mr Bukele said on Twitter.
“Furthermore it is well structured to have zero risk for those who do not want to take risks.
“The government will guarantee the convertibility to the exact value in dollars at the moment of the transaction.”
Mr Bukele said it would increase financial inclusion, investment, tourism, innovation and economic development.
The law will take effect 90 days after its official publication. The Central Bank and financial system regulators will publish the implementing rules in the interim.
Mr Bukele’s New Ideas party holds a majority in the new congress that began on May 1.
Other countries in the region, including Venezuela and the Bahamas, have introduced digital currencies, though none had adopted the original cryptocurrency, Bitcoin, itself.
Bitcoin, intended as an alternative to government-backed money, is based largely on complex maths, data-scrambling cryptography – thus the term “cryptocurrency” – lots of processing power and a distributed global ledger called the blockchain, which records all transactions.
No central bank or other institution has any say in its value, which is set entirely by people trading Bitcoins and which has wobbled wildly over time.