El Salvador Is The First Country To Recognize Bitcoin As Legal Tender

El Salvador has become the first country to legalise bitcoin as a form of payment.

The Bitcoin Law was passed by a "supermajority" of lawmakers in the Central American country's Congress, with 62 out of 84 votes in favour.

On 9 June, El Salvador president Nayib Bukele made this announcement on Twitter, where he wrote: “The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress. 62 out of 84 votes! History!”

The legislative assembly also Tweeted about the new law, saying: “With 62 votes, the legislative plenary session approves the #LeyBitcoin (Bitcoin law) with which EL Salvador adopts the #Bitcoin as legal currency”.

According to Financial Express, shortly after the vote, the price of this cryptocurrency jumped from $33,555 to $34,398.

The law was sent to the country’s Congress for a vote earlier on Wednesday by President Bukele.

The law reads: “The exchange rate between Bitcoin and the United States dollar, will be freely established by the market”.

“Prices may be expressed in Bitcoin. Tax contributions can be paid in Bitcoin,” it added.

The law also says that Bitcoin exchanges, like any other legal cash, will be exempt from capital gains tax.

All obligations in US dollars that existed before the law’s effective date may be paid in Bitcoin, the copy of the law shared by the president added.

Bitcoin is known for its extreme price swings, which have led some detractors to conclude that it is unfit to be used as a currency.

However, it is currently unclear how El Salvador, whose current official currency is the US dollar, will implement bitcoin as legal cash in the long run.

According to the law, the state would promote the required training and methods so that the populace can access bitcoin transactions.

Reports claimed that about 70 per cent of El Salvador's population lacks access to traditional financial institutions.

So, cryptocurrency is viewed as a means of expanding financial inclusion.

Bukele's decision to send the bill to Congress comes a week after El Salvador revealed that it had partnered with digital wallet company Strike to develop the country's modern financial infrastructure utilising bitcoin technology.