Wednesday 9/29/21
CRYPTOCURRENCY

Bitcoin becomes legal tender in El Salvador

The law means every merchant must accept Bitcoin as a payment if they have the technical capacity to do so
FILED - "No to Bitcoin," reads a sticker on a street stall selling lollipops and other sweets. Many street vendors have opposed the digital currency. The Central American state is nevertheless the first country in the world to take this step. A law to this effect had been passed three months ago and will now come into force on 07.09.2021. It stipulates that every merchant who is technically capable of accepting Bitcoin as a means of payment must do so. Photo: Víctor Peña/dpa
'No to Bitcoin,' reads a sticker on a street stall selling lollipops and other sweets. Photo: Víctor Peña/dpa.

Bitcoin became legal tender in El Salvador on Tuesday.

The Central American nation became the first country in the world to take the step as a law passed three months ago came into effect.

The law means every merchant must accept Bitcoin as a payment if they have the technical capacity to do so. Taxes can also be paid in the cryptocurrency.

No capital gains tax is to be levied on Bitcoin exchanges. The exchange rate to the US dollar will be freely decided by the market.

The dollar is used as an official means of payment in El Salvador instead of local currency.

President Nayib Bukele has said anyone who downloads the digital Chivo wallet will receive a starting credit worth 30 dollars.

There will be 200 Chivo cash machines, according to Bukele.

Bitcoin is the best-known digital currency. It is not controlled by a central bank but is rather created by a decentralized and enormously energy-intensive computer process.

The cryptocurrency is subject to extreme fluctuations in its value.

Dependency

El Salvador has used the US dollar as currency since 2001, which has made the country dependent on the monetary policy of the US Federal Reserve.

Allowing the circulation of a digital currency with a value dependent solely on market-based criteria is necessary for the country's economic growth, according to the text of El Salvador's law on making Bitcoin legal tender.

About 70 per cent of El Salvador's approximately 6 million residents have no access to traditional financial services. Many depend on remittances from relatives in the United States.

About 70 per cent of Salvadorans oppose the Bitcoin law, according to a nationwide survey conducted by the Universidad Centroamericana (UCA) with nearly 1,300 participants in August.

Around the same number of respondents had inaccurate ideas about Bitcoin, with only 4.8 per cent correctly defining it as a cryptocurrency.

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