The law requires that the State promote alternatives to facilitate the process of making transactions using bitcoin and instantly converting it into dollars, at the discretion of users.

State-promoted alternatives

The law regulating the introduction and use of bitcoin as legal tender does not go into deep technical detail to describe how the initiative will function. It merely recognizes bitcoin as "unrestricted and unlimited legal tender in any transaction," including tax payments. 

Brevity in El Salvador's Bitcoin adoption

The law grants the government the power to design and implement the institutional architecture required to ensure the proper application of bitcoin adoption. It leaves more practical matters to the Central Bank and Financial System Superintendency. 

Delegation of power in El Salvador's Bitcoin adoption

The measure does not replace the U.S. Dollar as El Salvador's official currency with bitcoin. It specifically states that the U.S. Dollar will still be used as a reference currency for accounting, and leaves the exchange rate between the two currencies to be determined by market forces.

Role of the U.S. Dollar in El Salvador's Bitcoin Law

- Brevity
- Role of US Dollar
- State-promoted alternatives
- Delegation of power

University of Minnesota - Twin Cities

On 7 September 2021, El Salvador became the first country to adopt bitcoin as legal tender, through a law passed by the Legislative Assembly.  The Central Bank drew up technical standards to determine how the initiative would function, and the government provided citizens with a digital wallet and launched an educational program to inform the public about its roll-out.

El Salvador's adoption of Bitcoin as legal tender

Gorjon, Sergio. (2021). The Role of Cryptoassets as Legal Tender: The Example of El Salvador. Banco de España. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3944765

The Role of Cryptoassets as Legal Tender: The Example of El Salvador

The transition to accepting bitcoin as legal tender took just under three months, after president Nayib Bukele unveiled the plan at the Bitcoin 2021 conference. The initiative was passed via an expedited procedure, securing a qualified majority in the Legislative Assembly. 

History of El Salvador's Bitcoin adoption

- Slashing the cost of remittances
- Boosting financial inclusion
- Saving public funds

Arguments for El Salvador's Bitcoin adoption

Key features of El Salvador's Bitcoin adoption

- Lack of popular support
- Exchange rate instability
- Jeopardization of government revenues
- Declining influence of monetary policy
- Financial market integrity

Criticisms of El Salvador's Bitcoin adoption

- Initial bitcoin price plunge
- Practical difficulties with the digital wallet
- Opacity and lack of consensus

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