The fear of possible defaulting of Chinese real estate giant Evergrande has caused broad sell-off in global financial markets, even causing a dip in cryptocurrencies.
President Nayib Bukele's government insists the move will give many Salvadorans access to bank services for the first time.
The country’s Central Bank will set rules for such currencies and determine how to license providers of related services.
The rate of cryptocurrency adoption has jumped by 880 percent in the last year as Vietnam, India and Pakistan have become the fastest crypto adopters.
Last week, Tesla Inc Chief Executive Officer Elon Musk said that the electric-car maker will most likely restart accepting bitcoin as payments once it conducts due diligence on the amount of renewable energy used to mine the currency.
The revamp, which would alter the way transactions are processed, is anticipated to go live on Thursday.
The move by Italy’s market watchdog is the latest in a string of regulatory actions taken by governments against the world’s largest crypto exchange.
Rumours have been doing the rounds for days that Paraguay will follow suit after El Salvador became the first country to use cryptocurrency.
Bitcoin sells for around $28,890, a level last seen at the beginning of the year, with analysts citing Chinese efforts to curb trading and mining operations.
For Turkey’s nascent blockchain ecosystem to thrive, it will need regulations that do not stifle innovation alongside public-private sector cooperation to secure the country’s digital future.
The law would create mechanisms to help Salvadorans, especially small businesses, quickly convert payments they receive in bitcoins into dollars.
El Salvador's President Nayib Bukele said that he will send a bill to Congress next week to make bitcoin legal tender in the Central American nation, touting its potential to help Salvadorans living abroad send remittances home.
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