A supermajority of the El Salvadoran legislature voted to adopt the bitcoin standard early Wednesday morning, recognising bitcoin as legal tender throughout the country.
In an early Wednesday vote, the nation’s legislature voted in favour of President Nayib Bukele’s proposal for the Latin American nation to adopt bitcoin.
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The president will sign the official document later today. All in all, Sixty-two members of the legislature voted in favour of the bill, nineteen opposed it and three abstained.
Bukele provided further details about his vision during a Twitter space chat, which was pitched as an effort to boost financial inclusion in a country where just 30% of the citizenry have access to financial services. The Twitter space was hosted by Nic Carter of Castle Island Ventures and Coin Metrics.
The president said that users won’t necessarily have to use a government wallet and can participate in the economy with their own wallets.
The bill mandates all businesses to accept bitcoin for goods or services, and the government will act as a backstop for merchants or entities that do not want to risk of crypto volatility, he said. To do this, the Salvadorian government will set up a Trust at the Development Bank of El Salvador to instantly convert bitcoin to US dollars and will assume merchants’ risk.
The fund will hold $150 million in dollars – a sizeable sum for El Salvadore.
“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,” he said.
“Of course he can do that in the markets also but he can ask the government to do it immediately.” The Development Bank’s trust fund would sell some of the bitcoin it receives for dollars in order to replenish the fund. Government officials from El Salvador will meet with the International Monetary Fund in the coming days to discuss things moving forward.
Bukele also indicated that the government may promote bitcoin mining since the country has an excess of geothermal energy which could be used productively. While the government isn’t actively looking to the bitcoin mining industry to fill that need, it is one sector that could benefit from this bitcoin initiative.
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