El Salvador on Wednesday became the first country in the world to adopt the cryptocurrency Bitcoin as legal tender.
A majority of lawmakers in the Legislative Assembly approved legislation proposed by Salvadoran President Nayib Bukele in a 62-22 vote, allowing Bitcoin to be used as a legal currency in the Central American country alongside the U.S. dollar.
The new Bitcoin law states the cryptocurrency can be used in any transaction and businesses must accept payment in Bitcoin, with the exception of those lacking the technology to do so, according to The Associated Press. The U.S. dollar will continue to be El Salvador’s official currency and the exchange rate between the two currencies “will be freely established by the market.”
— Nayib Bukele ???????? (@nayibbukele) June 9, 2021
Around 70% of Salvadorans do not have access to traditional financial services, the country’s economic ministry noted. The law aims to increase financial inclusion among the population, and the government will promote training for people to be able to carry out transactions using Bitcoin, according to the AP.
“The Bitcoin law is ambitious, but simple,” Bukele tweeted Tuesday. “Furthermore it is well structured to have zero risk for those who do not want to take risks. The government will guarantee the convertibility to the exact value in dollars at the moment of the transaction.”
Bukele added that adopting cryptocurrency would promote investment, tourism, innovation and economic development. He also suggested providing immediate permanent residence to cryptocurrency entrepreneurs in a tweet Sunday.
Bitcoin is intended as an alternative to government-backed currency. The digital tender is based on data-scrambling cryptography and a distributed global ledger known as blockchain. Because no central bank or financial institution can set its value, the price of Bitcoin can fluctuate rapidly over time. (RELATED: Bitcoin Value Tumbles After FBI Announces It Tracked, Recovered Millions Of Virtual Currency Ransom)
The price of Bitcoin surged 5% to $34,239.17 after the legislation was approved, CNBC reported.