RIO DE JANEIRO, BRAZIL – The Legislative Assembly of El Salvador, with a pro-government majority, approved on Tuesday the Bitcoin Law, which will allow the legal course of this cryptocurrency, making the Central American country the first in the world to recognize this crypto asset as a legal currency of exchange.
The initiative, which only establishes the legal tender of bitcoin and not of other cryptocurrencies or the underlying projects, was approved by 62 of the 84 deputies in the Parliament and will enter into force 90 days after its publication the Official Gazette.
According to the decree, the purpose of the law is the regulation of Bitcoin as legal tender, unlimited in any transaction and any title that natural or legal persons, public or private, may need to carry out.
The regulation, which President Nayib Bukele announced through Twitter, was introduced to the Parliament session without further legislative discussion.
The law establishes that the exchange rate between bitcoin and the dollar will be established “freely by the market” and will not be subject to capital gains taxes as any legal tender.
Bitcoin users use it primarily as a long-term haven of value in the expectation that its price will rise over time.
The legislation also indicates that every economic agent will accept bitcoin as a form of payment “when it is so offered by whoever acquires a good or service” and that the Executive branch will create the necessary institutional structure for the circulation of the cryptocurrency, following the provisions of the law.
Opposition deputy Rodrigo Ávila pointed out during his intervention in the plenary that bitcoin is “a volatile monetary mechanism and its use generates a serious situation if the pertinent measures are not taken.”
He also pointed out that “several” countries have banned the use of cryptocurrencies, especially bitcoin, and “others” have warned about the specific use of bitcoin.
He added that bitcoin “is allowed in several countries but has not been officialized as legal tender, which is being done here without further analysis or due discussion.”
However, President Bukele noted on his Twitter that “the #LeyBitcoin is ambitious but simple, it is also well structured so that it has 0 (zero) risk for those who do not want to take risks.”
He noted that “the Government will guarantee convertibility to the exact dollar value at the time of each transaction.”
“In turn, it will bring financial inclusion, investment, tourism, innovation and economic development for our country (…) let nobody tell us that we are too small to be big,” he added.
The Executive branch must create the regulations governing the application of the law, so it is expected that some elements that are not explained in the legislation, such as the “automatic and instant convertibility” of bitcoin into dollars, will be clarified.