In a world first, El Salvador makes Bitcoin legal tender

The Central American nation will allow Bitcoin to be used in all transactions – including paying taxes.

| More on:
Smiling ASX investor holding a gold bitcoin.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

El Salvador is the world's first country to adopt Bitcoin (CRYPTO: BTC) as legal tender. The nation's congress passed a bill allowing Bitcoin to be used as currency late yesterday afternoon.

In typical fashion, El Salvador's President Nayib Bukele made the announcement on Twitter Inc (NYSE:TWTR). He tweeted 62 out of 84 congress members voted in favour of making the cryptocurrency legal tender.

The news comes only days after President Bukele stated he would introduce the bill, which he believes will increase Salvadorans' financial freedoms.

President Bukele tweeted he'd sent the 3-page bill to congress 4 hours before he tweeted it had passed. It will take effect in 90 days' time.

El Salvador will allow its population to convert the cryptocurrency to US dollars through a trust created at its development bank BANDESAL.

Additionally, the country intends to give its less crypto-literate citizens "necessary training and mechanisms" to use Bitcoin in everyday transactions.

In another tweet, President Bukele said he wanted state-owned geothermal energy company LaGeo to source electricity from El Salvador's volcanos to put towards Bitcoin mining. It's hoped Bitcoin mining in the country will eventually be powered by 100% renewable energy.  

President Bukele has also offered immediate permanent residence in El Salvador for "crypto entrepreneurs".

Additionally, he highlighted that profits made from trading Bitcoin inside El Salvador won't be subject to capital gains tax.

Cryptocurrency for equality

According to President Bukele, using Bitcoin as tender would grant Salvadorans more financial equality.

He said 70% of El Salvador's population did not have bank accounts. Many Salvadorans rely on remittances sent from family living abroad, which often attract hefty transfer fees.

By using cryptocurrency for transfers, the country's population could effectively sidestep fees to receive billions of dollars more in remittances each year.

Additionally, Bitcoin can be transferred outside of traditional financial institutions. This could make it a more accessible currency for Salvadorans than US dollars.

However, the US dollar will remain El Salvador's official currency.

About the price of Bitcoin

Since President Bukele tweeted El Salvador has officially adopted Bitcoin as legal tender, the Bitcoin price has gained 13.9%.

Currently, Bitcoin is currently swapping hands for $48,087.58 per coin.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Twitter. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Cryptocurrencies

Man holding a calculator with Australian dollar notes, symbolising dividends.
ETFs

$10,000 invested in CRYP ETF a year ago is now worth…

This exchange-traded fund allows investors to gain exposure to cryptocurrency in a different way.

Read more »

Ethereum symbol in green.
Cryptocurrencies

Cryptocurrency comeback: Here's why Bitcoin and Ethereum are climbing again

Ethereum’s trading price has shot up 42.28% over the past month.

Read more »

Bitcoin coin with a rising arrow.
Cryptocurrencies

The Bitcoin price just leapt to new all-time highs. Here's why

The Bitcoin price just smashed through US$110,000. But what’s driving the rally?

Read more »

Bitcoin coins in a pile.
Cryptocurrencies

What's happening with the Bitcoin price amid the Trump tariff market panic?

You may have heard Bitcoin referred to as ‘digital gold’. But is it really a haven asset?

Read more »

A graphic picture of gold Bitcoins with the Bitcoin symbol lying on a desk with arrows shooting higher and one arrow lifting off the flat surface pointing to the sky.
ETFs

Dip your toes into cryptocurrency with these 2 ASX ETFs

Interested in cryptocurrency?

Read more »

Bitcoin symbol with a rising green arrow.
Cryptocurrencies

Bitcoin surges: How to invest through the ASX

Wanting to gain exposure to the cryptocurrency? Check out these two options.

Read more »

Bitcoin coins in a pile.
Cryptocurrencies

Here's what owning Bitcoin for 7 years has taught me

Bitcoin has been a fantastic investment for me, but not without its pitfalls.

Read more »

A woman holds a bitcoin token in her hand as she smiles at the camera in the background.
Cryptocurrencies

Bitcoin price surges on Donald Trump's cryptocurrency strategic reserve update

The Bitcoin price hit all-time highs of US$109,115 on the day Trump was sworn into office.

Read more »