Bitcoin has had a tumultuous year filled with highs and lows, and not just with its price, which soared north of $60,000 for 1 BTC before losing half its value. Now, El Salvador has become the first country in the world to make Bitcoin legal tender after a new law passed in the country's legislature on Tuesday.
The plan to make Bitcoin a national currency was announced by President Nayib Bukele over the weekend at the Bitcoin 2021 conference in Miami. Bukele also changed his Twitter avatar to a "laser eyes" pic that signals one's belief that Bitcoin is powering up, and all of this sent cryptocurrency enthusiasts through the roof, and for good reason. While Bitcoin has seen a few major mainstream milestones recently, such as Coinbase going public in a massive IPO, a country accepting Bitcoin for taxes (for example) is an important legitimation signal.
The law making Bitcoin legal tender in El Salvador passed with a majority of 62 votes, according to a tweet from the nation's legislature that showed lawmakers standing and applauding.
El Salvador adopted the US dollar as its currency in 2001. The text of the Bitcoin law notes that, to "increase national wealth for the greatest number of inhabitants," El Salvador needs a national currency that "answers exclusively to free-market criteria." Among the bill's provisions: All economic agents in the country must accept Bitcoin (if they are technologically able), taxes can be paid in bitcoins, and there will be no capital gains taxes levied on Bitcoin transactions.
As we've seen this year, the value of "free market"-based currencies such as Bitcoin can fluctuate wildly, however. To that point, the law also states that the government will establish a financial trust and any technology needed to guarantee that citizens can convert BTC to USD. In a tweet, Bukele said that, "The Government will guarantee convertibility at the exact value in dollars at the time of each transaction."
"In turn, it will bring financial inclusion, investment, tourism, innovation and economic development for our country," Bukele tweeted. "Let no one tell us that we are too small to be big."