El Salvador has become the world's first country to make bitcoin an official tender. President Nayib Bukele's bill to make bitcoin legal cash was passed by the Salvadoran Congress on Wednesday. The bill received a supermajority of 62 out of 84 votes cast.

Prices in El Salvador can now be denominated in bitcoin, tax contributions can be paid in bitcoin, bitcoin exchanges will not be subject to capital gains tax, and retailers must accept bitcoin as payment now that the bill has been signed into law. The bill can be read in its entirety here. El Salvador is committed to a hard-currency peg and tighter monetary discipline by embracing bitcoin, according to Coindesk contributor Frances Coppola, severing its monetary and fiscal policy dependence on the United States.

As we stated in a whitepaper published last year, bitcoin has the potential to become a significant savings vehicle in emerging nations, to the point where firms may demand bitcoin payment instead of cash. If this is the case, the velocity of their fiat currencies will increase, resulting in currency depreciation and an increase in inflation as measured by their sovereign currencies. Fiat-denominated debt would become worthless in the case of hyperinflation, while dollar-denominated bonds would become unpayable.

While the Bitcoin network has not grown sufficiently to serve an entire economy, we believe that when its infrastructure develops and reaches critical mass, the demand for bitcoin in emerging nations will expand. We estimate that if bitcoin were to grab just 5% of the global monetary base outside of the four largest fiat currencies - the US dollar, the yen, the yuan, and the euro - its market cap would rise by nearly $2 trillion.