On 8 June 2021, El Salvador became the first nation to make bitcoin legal tender. The law was published in El Salvador's Diario Official (Official Gazette) on 9 June, and takes effect 90 days after publication (7 September 2021). An unofficial English language translation of the law is available.
Under the law, providers of goods and services are required to accept bitcoin if offered as payment. Prices may be posted in bitcoin. Tax obligations can also be paid using bitcoin.
The U.S. dollar is still the official currency in El Salvador; the new law adds bitcoin as an additional form of payment. The exchange rate between bitcoin and the U.S. dollar is to be determined on a free-market basis. Exchanges in bitcoin are not subject to a capital gains tax.
The law also requires the government to provide alternatives to private sector mechanisms to allow the population to make transactions in bitcoin and have automatic and instant convertibility to the U.S. dollar, if desired. The government is tasked with promoting necessary training facilities so El Salvadorans can access bitcoin transactions.
Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association