El Salvador became the first country in the world to adopt bitcoin as a legal tender after Congress approved President Nayib Bukele's proposal to embrace cryptocurrency.

Bitcoin's use as a legal tender will become law within three months.

Lawmakers in the South American country voted by a "supermajority" in favour of the Bitcoin Law. With 62 out of 84 possible votes, a majority of lawmakers voted in favour of the initiative to create a law that will formally adopt bitcoin as a legal currency.

Earlier on Wednesday Salvadoran President Neyib Bukele had sent the law to the country's Congress for a vote.

"This is a historic moment. The code (Bitcoin) Satoshi wrote is now a legal tender of a country. Bitcoin is the soundest asset and one of the biggest technological innovations the world has ever seen. We are looking forward to how El Salvador incorporates Bitcoin into its economy," Avinash Shekhar, Co-CEO of ZebPay said.

President Bukele has touted the use of Bitcoin for its potential to help Salvadorans living abroad to send remittances back home. He added that the US dollar will also continue as legal tender.

El Salvador's dollarized economy relies heavily on the money Salvadorans send from abroad. In 2019, these remittances made up nearly $6 billion or around a fifth of the GDP, one of the highest ratios in the world, data from the World Bank showed.

"It will bring financial inclusion, investment, tourism, innovation and economic development for our country," Bukele said in a tweet shortly before the vote in Congress, which is controlled by his party and allies.

He added that the use of bitcoin will be optional and will not bring risks to users. "The government will guarantee the convertibility to the exact value in dollars at the moment of each transaction," Bukele said.

The country intends to use 'cheap and clear' volcano energy to mine the digital coin.

El Salvador struggles with trust in the monetary system. It hasn't had its own monetary policy since 2001 and over 70 percent of its total population of 64 lakh has no bank account.

The law was approved despite the concerns about the potential impact on El Salvador's program with the International Monetary Fund. The country is seeking more than $1 billion with the IMF. Experts say that the move could complicate the talks.

At the time of writing, Bitcoin was trading 4 percent up at $34,163, after plunging nearly 12 percent overnight. The cryptocurrency market was largely trading in the green, but flat.

With inputs from Reuters

Also Read: Cryptocurrency Prices on June 9: Bitcoin, Ether plunge, rebound to trade flat

First Published:Jun 9, 2021 12:43 PM IST