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El Salvador becomes first nation to adopt bitcoin as official currency

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A country in Central America, El Salvador, has become the first nation to approve cryptocurrency bitcoin as an official currency. A bill making the world’s most popular cryptocurrency a legal tender in the country was passed by the El Salvador Congress on June 9.

El Salvador President Nayib Bukele took to Twitter to announce the development. Interestingly, El Salvador could adopt bitcoin as a legal tender as it does not have its own currency and uses the US dollar as its official currency. The country is also formulating a new law that will provide citizenship to any one individual who invests 3 BTC, approximately Rs 76.57 lakh, into El Salvador’s economy.

High volatility in cryptocurrency market

The move comes at a time when there is high volatility in the cryptocurrency market owing to the regulatory actions proposed against cryptocurrencies, particularly bitcoin, by the US and China. Also, concerns regarding the environmental impact of mining these cryptocurrencies have attracted global attention.

What the law provides

The legislation reads, “The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out.”

Following this move, citizens of El Salvador will be able to show prices in bitcoin. They will also be allowed to make tax contributions with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax.

The law also says that the state will promote the necessary training and mechanisms so that the population can access bitcoin transactions. It adds that almost 70 per cent of the country’s population does not have access to traditional financial services.

Bitcoin price surges

Following the announcement by El Salvador, bitcoin price jumped by 9.47 per cent on Wednesday to $35,029 at around 8 pm IST, with its market cap surging to $657 billion. The cryptocurrency has provided a return of 21.15 per cent on investment in 2021. However, the cryptocurrency is trading significantly lower than its all-time high of $64,829 recorded in mid-April.

 

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