Why it matters: Critics have questioned whether or not Bitcoin is suitable for use as a common currency due to its wild fluctuations in price. Case in point, Bitcoin is up nearly 14 percent over the past 24 hours on the news. If nothing else, El Salvador's adoption of Bitcoin could serve as an interesting case study for the viability of Bitcoin as a traditional currency.

El Salvador has become the first country to officially adopt Bitcoin as legal tender.

The nation’s legislature approved the Bitcoin Law by a supermajority, with 62 members of the Salvadoran Congress voting in favor of the measure.

Per the Bitcoin Law, prices for goods can now be shown in Bitcoin and tax contributions can be paid with the virtual currency. What’s more, exchanges involving Bitcoin will not be subject to capital gains tax. The law further states that the exchange rate between Bitcoin and the US dollar, the country’s other official currency, will be freely established by the market.

El Salvador is located in Central America, bordered by Honduras on the northeast, Guatemala on the northwest and the Pacific Ocean to the south. According to Statista, El Salvador had a GDP of $27.02 billion in 2019.

In April, the world’s largest cryptocurrency by market cap hit an all-time high of more than $64,000 but has since lost nearly half of its value.

Image credit FabrikaSimf