It’s Official, Bitcoin is Legal Tender in El Salvador – How it Will Work

June 10, 2021, 6:00 PM AEST - 1 year ago

In a historic move for the story of global Bitcoin adoption, the El Salvador legislative body has officially voted in favour of a bill adopting Bitcoin as legal tender.

On June 9, in a vote of 62 in favour, 19 opposed and 3 abstentions, history was made. All that’s left is for the president to sign it into law, expected to happen June 10.

This news following the breaking news on June 7, where Nayib Bukele, President of El Salvador, at the Bitcoin 2021 conference, announced that he would be submitting a bill to Congress that would effectively treat Bitcoin as legal tender.

Users Won’t Require a Government Issued Wallet

President Nayib Bukele discussed the development with Coindesk columnist Nic Carter, highlighting financial inclusion and noting that users won’t necessarily be required to have a government digital wallet. However, businesses would be mandated to accept Bitcoin for the sale of goods and services.

A Trust Fund Will Manage Bitcoin’s Volatility

To manage the volatility of the cryptocurrency, a trust fund would be set up to instantly convert Bitcoin to US dollars, effectively transferring the volatility risk to the trust. From time to time, the trust would replenish its US dollars through the sale of Bitcoins.

If there’s an ice-cream parlour [and the owner] doesn’t really want to take the risk, he has to accept Bitcoin because it’s a mandated currency but he doesn’t want to take the risk of convertibility, so he wants dollars deposited in his banking account and when he sells the ice cream, he can ask the government to exchange his Bitcoin [for] dollars. Of course he can do that in the markets also but he can ask the government to do it immediately.

Nayib Bukele, President of El Salvador
El Salvador President
Nayib Bukele’s recently updated Twitter profile image: note laser eyes

Government officials are expected to meet with the IMF later in the week. Analysts eagerly await the outcome of the meeting as their response is likely to set the precedent for other nations following suit.

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