El Salvador is the first country to adopt bitcoin as legal tender

Most lawmakers have approved a motion Salvadorian President NB Bukele which will allow bitcoin to be used as legal tender in the country alongside the US dollar.

The law states that “all economic agents shall accept bitcoin as a form of payment when it is offered by a buyer of a good or service.” It also says that tax payments can now be made in bitcoin.

Bukele, 39, is a right-wing populist who came to power in 2019. He previously said that El Salvador would partner with digital finance company Strike to set up the necessary infrastructure to support the use of bitcoin as an official currency.

In a tweet ahead of the vote, Bukele said that using bitcoin as fiat would promote financial inclusion, tourism, innovation and economic growth. El Salvador is the smallest country in Central America, and while it was quick to contain the coronavirus pandemic, its economy was hit hard last year, According to the World Bank.

future of digital currencies

Although central banks around the world have reacted with attraction to bitcoin, they are hesitant to adopt the cryptocurrency because of their extreme volatility. Bitcoin, for example, crashed more than half of its value earlier this year after hitting a record high of over $60,000. Other, more thinly traded cryptocurrencies are even more volatile, trading up and down like seesaws – often based on speculation or meme tweets. Tesla (TSLA) CEO Elon Musk.

However, the rise in the popularity of crypto has prompted the US Federal Reserve to keep a close eye on old-fashioned dollar limits – particularly around payments and money transfers that can take several days to complete. Bitcoin transactions happen almost instantly.

Cryptocurrencies also do not require a bank account. Instead, they are kept in a digital wallet. It can help people in poor communities – such as many in El Salvador but also minority communities in the United States – increase their access to finance.

A member of the Federal Reserve Board of Governors, Lyle Brainard, laid out a case last month for a secure, central bank-backed digital currency that could create a more efficient payment system and expand financial services for Americans who need to be able to pay more money. has been reduced by traditional banks.

Federal Reserve Chairman Jerome Powell announced in May that the central bank would publish a paper this summer outlining the board’s thinking on the benefits and risks associated with a digital US dollar.

Although cryptocurrencies such as bitcoin are digital, the central bank digital currency will be fundamentally different from existing crypto as it will still be controlled by a central bank rather than a decentralized computer network.

— Stefano Pozzebon, Jorge Engels and Allison Morrow contributed to this report

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