El Salvador passes bitcoin legislation, becomes first country to accept cryptocurrency as legal tender

On June 8, President Nayib Bukele — a backer of the cryptocurrency since at least 2017 — sent the 'Bitcoin Law' to El Salvador's congress. With 62 out of 84 votes, the legislature passed the Bitcoin Law with a 'supermajority'. 

The law has received much fanfare on social media platforms, but experts on El Salvador have been quick to question whether the legal adoption of bitcoin jeopardises the country's planned $1 billion-program with the IMF. 

Bukele responded to criticism on his Twitter handle, 'If 1% of [Bitcoin] is invested in El Salvador, that would increase our GDP by 25%. On the other side, #Bitcoin will have 10 million potential new users and the fastest growing way to transfer 6 billion dollars a year in remittances.' El Salvador is a dollarized economy that relies heavily on remittances, with those $6 billion sent back home from workers abroad making up almost a fifth of the country's GDP. 

The Bitcoin Law will officially come into force within 90 days and will make the use of the decentralised cryptocurrency optional for citizens. Bukele promised, 'The government will guarantee the convertibility to the exact value in dollars at the moment of each transaction.'

Due to its volatility and sophisticated technology, critics have argued that bitcoin is not an effective currency. They have also questioned the lack of taxation on bitcoin, which could drastically limit the government's tax revenues.

The legislation proposes to promote liberty by offering greater financial inclusion to approximately 70% of citizens who do not have access to traditional financial services. It promises that the state will provide training and mechanisms for bitcoin transactions.

Bitcoin is up 230% in the last 12 months, but has experienced a price drop-off in past months.