In an exciting turn of events, El Salvador recently announced its plan to adopt Bitcoin as legal tender and became the first country to do so. The proposal to accept Bitcoin as legal tender was brought forward by Salvadoran President Nayib Bukele and was approved by most lawmakers.
In the proposal, President Bukele also asked the Salvadoran government to accept the US Dollar as legal tender alongside Bitcoin. According to the law, “all economic agents shall accept bitcoin as a form of payment when it is offered by the purchaser of a good or service.” Apart from Bitcoin being used as an accepted payment method for sale or purchase, it can also be used to make tax payments.
Giving a currency legal tender means borrowers can use it to repay debts officially. However, it doesn’t necessarily mean that a business is required by law to accept that currency as a payment.
What does it mean for Bitcoin?
While several central banks worldwide have positively reacted to Bitcoin and other cryptocurrencies, they are yet to embrace them partly due to the feared volatility. As evident from the past few months, the price trend of any cryptocurrencies cannot be predicted accurately, which stops the central banks from legally accepting cryptos.
Regardless, the progress of cryptocurrencies cannot be ignored. Recently, the US Federal Reserve was forced to look at the slow transaction speed of fiat currencies compared to the quick transaction speed for Bitcoin.
Besides speed, cryptocurrencies have several advantages over fiat currencies, with the major one being no requirement for a bank account. Not requiring a bank account can help several underdeveloped communities, such as El Salvador, use the latest financial services with ease.
Central banks are not blind to these advantages and have taken a step towards global adoption. The Federal Reserve Chairman recently announced the Central Bank’s plan to publish a paper containing the pros and cons of the Digital US dollar.
With exciting news and advancements like these, it is only a matter of time that cryptocurrencies are globally accepted as a legal payment method.