The law states that “all economic agents must accept bitcoin as a form of payment when offered by the purchaser of a good or service.” It also says that tax payments can now be made in bitcoin.
Bukele, 39, is a right-wing populist who rose to power in 2019. He previously said El Salvador would partner with digital finance company Strike to establish the infrastructure needed to support the use of bitcoin as an official currency.
The future of digital currencies
However, the rise in cryptocurrency’s popularity has led the US Federal Reserve to take a hard look at the limitations of the old-fashioned dollar – especially around payments and remittances that can take days to complete. Bitcoin transactions happen almost instantly.
Cryptocurrencies also do not require a bank account. Instead, they are kept in digital wallets. It could help people in poorer communities – like many in El Salvador, but also in minority communities in the United States – gain greater access to their economy.
Lael Brainard, a member of the Federal Reserve Board of Governors, filed a lawsuit last month for a secure, central bank-backed digital currency that could create a more efficient payment system and expand financial services to Americans who have been understaffed by traditional banks. .
Federal Reserve Chairman Jerome Powell announced in May that the central bank would publish a paper this summer outlining the board’s thinking on the benefits and risks of a digital U.S. dollar.
Although cryptocurrencies like bitcoin are digital, a central bank’s digital currency would be fundamentally different from current cryptocurrencies because it would still be controlled by a central bank rather than a decentralized computer network.
– Stefano Pozzebon, George Engels and Allison Morrow contributed to this report