The country’s president says the move will bring inclusion to Salvadorans who don’t have access to financial services, but analysts warn of economic risks from bitcoin’s extreme volatility.
El Salvador passed a new law on Wednesday that would make the small Central American country the world’s first to deem bitcoin legal tender, a move that analysts say risks putting its economy at the mercy of the digital currency’s sharp swings.
The designation allows bitcoin, the world’s largest cryptocurrency by market value, to be used to buy goods and pay taxes and bank loans. Businesses would be required to accept bitcoin for payment, with the bitcoin-dollar exchange rate set by the market.
Converting bitcoin into other currencies won’t be subject to capital gains tax, according to the three-page bill that was submitted Tuesday evening and swiftly approved after midnight by lawmakers of President Nayib Bukele’s New Ideas party, which enjoys a supermajority in the 84-member Legislative Assembly.