On Wednesday, El Salvador’s president signed into law a proposal to adopt Bitcoin as legal tender, making the Central American nation the first in the world to officially use the cryptocurrency.
The new law says that companies must accept Bitcoin as a form of payment, and the government will allow people to pay taxes with it as well. The exchange rate with the dollar will be set by the market, and exchanges from dollars to Bitcoin won’t be subject to capital gains tax. The law was passed by a super majority vote of the legislature, with 62 of 84 deputies assenting.
President Nayib Bukele said the new law would make it easier for Salvadorans living abroad to send remittances back to friends and family in the country.
Well it is very forward-thinking, and adopting a cryptocurrency in theory is fine (other banks are also looking at it), but Bitcoin itself is quite volatile, and generally a country wants predictability around its currency. An advantage for remittances I suppose it not having to make use of expensive international banking transfer systems.
Central American nation hopes to lower remittance costs and boost investment.