The Bitcoin law was passed by a "super majority" in the country's Congress with 62 votes to 22.
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The increasing popularity of cryptocurrency and its seemingly endless variety of coins has left many questioning whether or not cryptocurrencies could be used as legitimate currencies.
Governments in certain countries like China have even gone so far as to impose certain restrictions on the trading and use of cryptocurrencies to prevent consumer influence from growing.
But on Wednesday El Salvador made history by becoming the first country to legally accept the popular cryptocurrency Bitcoin.
Related: The Future of Cryptocurrencies? 60% of central banks are already working on their own digital currencies
The Bitcoin law was passed by the country's Congress with 62 votes to 22 by a “super majority”.
"The purpose of this law is to regulate Bitcoin as unrestricted legal tender with liberating power, unlimited in every transaction and for every title that public or private natural or legal persons demand," said Salvadoran President Nayib Bukele in an uploaded document his Twitter account.
The document states that Bitcoin can and must be accepted by any business or for any retail purchase and in tax levies, and that the exchange of Bitcoin is not subject to capital gains tax.
I just sent the #BitcoinLaw to Congress pic.twitter.com/DljnxsXlyt
– Nayib Bukele (@nayibbukele) June 9, 2021
The US dollar continues to be used as the "reference currency" for the country, with the exchange rate between the two tenders being freely determined by the market.
Related: Bitcoin's founder will have a statue in Budapest
The law also states that "every economic operator must accept Bitcoin as payment when offered to them by whoever purchases a good or service," with the exception of companies or vendors who do not have access to technologies that can access it Enable cryptocurrencies.
A clause below explains that in the event that a company does not want to hold onto the bitcoin and take the risk of the ever-changing volatility of the cryptocurrency, trust is created within the country's central bank, which essentially eats up the risk and converts bitcoin immediately in US dollars.
"El Salvador's proposed Bitcoin law makes it clear in several places that the government will allocate resources to ensure that Salvadorans are trained in the use of Bitcoin and have access to the technologies (e.g. smartphones, software, bandwidth), which are necessary for its use, ”Bukele wrote in another tweet.
Bukele also announced that a new Bitcoin mining hub is being built in the country using volcanic energy extracted from an artificial well.
Bitcoin is known for its volatility.
Its valuation has been known to explode or plummet sometimes seemingly instantly, with the coin's record high reaching a price of around $ 64,000 earlier this spring.
Bitcoin was up over 10% in a 24-hour period late Wednesday afternoon.
Similarly, a tweet from Elon Musk crashed Bitcoin