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President Bukele said the country may explore Bitcoin mining as a way to put its geothermal energy option to full use.
Latin American nation, El Salvador has made history as the first country to accept premier digital currency, Bitcoin (BTC) as a legal tender. Per a Coindesk report, a supermajority in the country’s legislative arm voted in favor of the Bill proposed by President Nayib Bukele to officially recognize the cryptocurrency as an official currency to complement the United States Dollar it currently uses.
Bitcoin has come a long way from when it was first introduced by Satoshi Nakamoto with the publishing of the currency’s Whitepaper in 2008, and the eventual launch of the currency in 2009. Since then, the coin has been tossed around in many scenarios, some encouraged its growth, and others largely held it bound. Government regulations, energy consumption criticisms to mention a few accounts for the latter, however, events in the past year seeing multinational corporations begin to invest and acquire the digital currency stirred the changes we are seeing today.
While many governments are exploring means to clamp down on crypto and Bitcoin activities, in particular, the El Salvadoran legislature has teamed up with Bukele to back the coin for its uniqueness. The vote that passed the bill came with 62 members voting in favor, 19 voting against, and 3 abstentions. The nation’s move is against the norm and there are plans for government officials to go explain the plans of the new law to the International Monetary Fund (IMF).
Bitcoin Is a Legal Tender in El Salvador: Here’s What to Expect
With Bitcoin becoming an official legal tender – as will be finalized when President Bukele signs it into law – businesses are now mandated to accept the cryptocurrency for payments. Beyond payments, all forms of taxes can be paid using BTC, transactions or investments involving Bitcoin will not be subjected to a capital gains tax.
The acceptance of Bitcoin as a legal tender is not targeted at offsetting the role of the Dollar in the country’s payment ecosystem and will serve as the reference point for the new form of money. The issue of volatility is also going to be addressed through a Trust that will be opened at the Development Bank of El Salvador. This trust is going to help mitigate the risks associated with price fluctuations as it will help merchants in the conversion of their Bitcoin holdings to Dollar in real-time. An initial allocation of $150 million will be made into the new Trust.
“If there’s an ice cream parlor, he 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, when he sells the ice cream, he can ask the government to exchange his bitcoin to dollars,” said President Bukele in a Twitter Space conversation hosted by Nic Carter of Castle Island Ventures. “Of course he can do that in the markets also but he can ask the government to do it immediately.”
In addition, President Bukele said the country may explore Bitcoin mining as a way to put its geothermal energy option to full use.