El Salvador has made history by becoming the first country in the world to officially adopt Bitcoin as legal tender. This landmark decision came after the Salvadoran Legislature, by a supermajority of 62 out of 84 votes, approved President Nayib Bukele’s proposal to embrace the leading cryptocurrency. President Bukele is set to sign the legislation into law, solidifying El Salvador's pioneering step in global finance.

A primary driver behind this move is Bitcoin's potential to facilitate remittances for the significant portion of Salvadoran citizens living abroad. President Bukele highlighted that approximately 70% of the population lacks access to traditional financial services, and Bitcoin offers a theoretically quick and cost-effective method to send money across borders, bypassing conventional remittance firms. In 2019, remittances accounted for nearly $6 billion, or around a fifth of El Salvador's GDP, making them a crucial economic pillar. The U.S. dollar will continue to serve as legal tender alongside Bitcoin, creating a dual-currency system.

President Bukele also asserted that Bitcoin will usher in financial inclusion, investment, tourism, innovation, and economic development for the country. He clarified that the use of Bitcoin will be optional for individuals and is designed not to pose risks to users. Under the new regulation, which will take effect in 90 days, the Bitcoin-dollar exchange rate will be determined by the market. To ensure stability and ease of conversion, the government will establish a trust, estimated at $150 million, at the country’s development bank, BANDESAL. This trust will function as a clearinghouse, instantly converting Bitcoin to U.S. dollars and mitigating convertibility risks for merchants.

The law mandates that firms must accept Bitcoin as payment for goods and services when offered, and even tax contributions can be paid in the cryptocurrency. This means that even a small business, like an ice cream parlor, must accept Bitcoin. If the business owner prefers to receive dollars, they can request the government to exchange their received Bitcoin for dollars through the established trust, ensuring immediate convertibility and protecting against price volatility.

However, the bold move has not been without potential complications. Government officials are scheduled to meet with the International Monetary Fund (IMF) in the coming days to discuss the plan, as analysts suggest this decision could complicate El Salvador's ongoing negotiations for a program exceeding $1 billion. Following the announcement, the price of Bitcoin saw a modest increase, rising by 2% to $34,067 after a three-week period of decline.