Please ensure Javascript is enabled for purposes of website accessibility

This Country Just Made Bitcoin Legal Tender

By Bram Berkowitz - Jun 9, 2021 at 9:24AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This means that within El Salvador, Bitcoin must now be accepted if someone offers to repay a debt with the cryptocurrency.

Many countries and their central banks and governments have been slow to take to the popular cryptocurrency Bitcoin (BTC -2.07%), but not El Salvador.

The Central American country's Congress just voted to make Bitcoin legal tender, meaning that it must be accepted in the country when offered to repay a debt. El Salvador is the first country to take such measures.

The passing of the bill does not remove the U.S. dollar as legal tender. El Salvador's lead trade official said the law just allows people to choose to use Bitcoin instead of the dollar if they want. He also said that Bitcoin would be tied to the dollar exchange rate.

The wording of the law says that its purpose "is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out."

Picture of colorful circle with Bitcoin logo in the middle.

Image source: Getty Images.

Once the law is in place, citizens will be able to pay taxes in Bitcoin, and Bitcoin exchanges will not be subject to capital gains taxes.

Those expressing concern with the move argue that Bitcoin is simply too volatile to be treated like a currency. According to the law, the market will set the exchange rate between Bitcoin and the U.S dollar.

In addition, analysts say the move could complicate El Salvador's relationship with the International Monetary Fund, according to Reuters.

However, Bitcoin has always been pushed as a way to give more people access to the financial system because participants don't need bank accounts, just a digital wallet, and El Salvador has a large unbanked population.


Bram Berkowitz owns shares of Bitcoin. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bitcoin Stock Quote
$23,378.30 (-2.07%) $-493.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.