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In a first, Bitcoin to become legal tender in this country from Sept; how will it work?

EL Salvador's President Nayib Bukele, in a national address on June 24, said that a recently ratified law, making Bitcoin legal currency will come into effect from September 7

Women buy at a store at El Zonte Beach in Chiltiupan, El Salvador June 10, 2021. (Photo: Reuters) Women buy at a store at El Zonte Beach in Chiltiupan, El Salvador June 10, 2021. (Photo: Reuters)

Bitcoin will be a legal currency in El Salvador from September. The central American country's President Nayib Bukele, in a national address on June 24, said that a recently ratified law making the digital currency legal tender will come into effect from September 7.

Bukele, however, cleared that Bitcoin's used will be optional. El Salvador's Congress had on June 9 approved the president's proposal to accept the cryptocurrency.

This makes El Salvador the first country in the world to adopt Bitcoin as legal tender. Making the cryptocurrency's use as discretionary, Bukele noted that "nobody will receive Bitcoin if they don't want it." He further stated that "if someone receives a payment in Bitcoin, they can choose to automatically receive it in dollars."

Also Read: El Salvador wants Bitcoin to be legal tender; here's why

Meanwhile, salaries and pensions will continue to be paid in US dollars, said Bukele, without specifying if that included salaries paid to state workers and private sector employees.

Earlier in the day, US-based Bitcoin ATM firm Athena Bitcoin said it plans to invest over $1 million (roughly Rs. 7.4 crores) to install some 1,500 cryptocurrency ATMs in El Salvador, especially where residents receive remittances from abroad.

According to Athena Bitcoin's website, the ATMs can be used to buy Bitcoins or sell them for cash.

Also Read: Crypto economy: This village in El Salvador uses bitcoins to buy groceries, pay utilities

"One of the reasons we passed the Bitcoin law is precisely to help people who send remittances," said Bukele, adding that the high cost of commissions traditionally associated with sending money home would be eliminated by using the cryptocurrency.

El Salvador relies heavily on money sent back from workers abroad. World Bank data showed remittances to the country made up nearly $6 billion (roughly Rs. 44,480 crore) or around a fifth of gross domestic product (GDP) in 2019, one of the highest ratios in the world.

Also Read: El Salvador becomes first country to grant legal tender status to Bitcoin

Less than 1 per cent of the volume of global cross-border remittances is currently in cryptocurrency, according to Kenneth Suchoski, US payments and fintech analyst at Autonomous Research.

But in the future crypto is expected to account for a larger slice of the more than $500 billion (roughly Rs. 37,06,925 crore) in global annual remittances.