El Salvador has approved a law to make bitcoin legal tender, making it the first country in the world to formally adopt cryptocurrency as an official form of currency.
The Bitcoin Law was approved by a “supermajority” within the Central American country’s congress.
“The purpose of this law 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,” the Bitcoin Law states.
“It is the obligation of the State to facilitate the financial inclusion of its citizens in order to better guarantee their rights.”
It is estimated that roughly 70 per cent of Salvadorians do not have access to traditional financial services like bank accounts.
The classification of bitcoin as legal tender means it will not be subject to capital gains tax, which President Nayib Bukele hopes will also entice crypto entrepreneurs to the country.
The price of bitcoin shot up by 5 per cent following the announcement on Wednesday.