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Bitcoin is now legal tender in El Salvador

SAN SALVADOR, El Salvador (AP) – El Salvador’s Legislative Assembly has approved legislation making Bitcoin cryptocurrency legal tender in the country, the first country to do so, just days after President Nayib Bukele made the proposal at a Bitcoin conference.

Digital currency can be used in any transaction and any business will need to accept payment in Bitcoin except those that don’t have the technology to do so. The US dollar will also continue to be El Salvador’s currency and no one will be forced to pay in Bitcoin, according to legislation approved Tuesday night.

“Every restaurant, every barber shop, every bank … everything can be paid for in US dollars or Bitcoin and no one can refuse payment,” Bukele said in a one-hour social media meeting with thousands of US-based Bitcoiners as an invoice. was debated Tuesday evening at the Congress of El Salvador.

The exchange rate between the two currencies will be established by the market and all prices may be expressed in Bitcoin – although for accounting reasons the dollar will continue to be the base currency.

The government will encourage the training of people able to transact with Bitcoin.

The Ministry of Economy noted that 70% of Salvadorans do not have access to traditional financial services and said the country “must allow the circulation of a digital currency whose value exclusively follows the criteria of the free market” for stimulate growth.

“The Bitcoin law is ambitious, but simple,” Bukele said on Twitter. “In addition, it is well structured to have zero risk for those who do not want to take risks. The government will guarantee convertibility at the exact dollar value at the time of the transaction.

The law would create mechanisms to help Salvadoarians, especially small businesses, quickly convert the payments they receive from Bitcoins to dollars – helping them avoid the risk of falling in value, as they did. days.

“They have to take Bitcoin, but they don’t have to take the risk,” Bukele said. “We can make money or lose it, but it doesn’t matter. The purpose of the trust fund is not to make money but to help make Bitcoin legal tender.

Additionally, Bukele said anyone who invests three Bitcoins in El Salvador – currently around $ 105,000 – will be eligible for permanent residence.

Bukele said he would discuss his plans with the International Monetary Fund on Thursday. He denied that the move was an attempt to de-dollarize the economy.

“The goals of having the US dollar as legal tender are being replicated on steroids with Bitcoin,” he said. “It will help to have both currencies as legal tender.”

The law will come into force 90 days after its official publication. The Central Bank and financial system regulators will publish the implementing rules in the meantime.

Bukele’s New Ideas Party holds a qualified majority in the new congress sitting on May 1. On day one, he ousted judges from the Constitutional Chamber of the Supreme Court and then replaced the attorney general, prompting concerns from the United States and others about the Bukele concentration. power.

Other countries in the region, including Venezuela and the Bahamas, have introduced digital currencies, though none have adopted the original cryptocurrency, Bitcoin, itself.

Bitcoin, conceived as an alternative to government-backed money, is based largely on complex math, data-scrambling cryptography – hence the term “cryptocurrency” – a lot of processing power and a Global distributed ledger called blockchain, which records all transactions. No central bank or other institution has a say in its value, which is entirely set by people who trade Bitcoin and has vacillated tremendously over time.

Bitcoin and other popular digital currencies, including Ethereum and Dogecoin, all fell sharply on Wednesday, according to tracking site Coindesk. Bitcoin, which topped $ 60,000 at the start of the year, slipped 7% to $ 32,690.

The legislation has established a government trust fund that will ensure automatic convertibility into dollars.

Carlos Carcach, a professor at the El Salvador Graduate School of Economics and Business, argued that adopting Bitcoin as legal tender “is neither necessary nor practical”, although he added, “As long as there is someone who accepts payment with Bitcoin, the same as they accept dollars, there would be no problems.

He noted that Bitcoin is extremely volatile, so investors “run the risk of getting rich and the next day being poor.”

Opposition lawmaker Rodrigo Ávila of the conservative Arena party complained that the legislation had not been sufficiently discussed by the Legislature before it was passed. There has been no testimony from economic or cybercrime experts.

U.S. officials have said Bitcoin was used to pay the ransom for the Colonial Pipeline cyberattack that prompted the operator of the nation’s largest fuel pipeline to shut down operations last month.

El Salvador’s decision rekindled memories of the November 30, 2000 decision to dollarize El Salvador’s economy, an action taken in the middle of the night by Congress controlled by Arena.

El Salvador last year received some $ 6 billion in remittances from Salvadorans living abroad, or about 16% of the country’s gross domestic product. Bukele said Bitcoin could eliminate the costs of sending that money home.

“It’s not something for rich people only. It’s for everyone, ”said Bukele, 39, who philosophically spoke of the power of cryptocurrency to loosen control of central banks and empower young entrepreneurs.

“We are building our own future. So why do we have to resign ourselves to a dystopian future? “, He declared, adding that he is taking advantage of the moment without fully understanding the change in international finance that his small homeland has been able to trigger. “It will be a huge change not for El Salvador but for the world. It is beautiful to be part of a huge change in humanity.

AP writer Joshua Goodman in Miami contributed to this report.

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