El Salvador becomes the first country in the world where Bitcoin is legal currency, after the Congress of El Salvador approved the bill wanted by the president with a large majority Nyib Watch to revive the economy. The Central American nation of six million people is the first to adopt a cryptocurrency as its official currency, albeit alongside the US dollar. “The bitcoin law has just been passed by a super majority in Congress, 64 votes out of 84. It’s history,” Bukele tweeted. In announcing the bill a few days ago, the president explained that the goal was “to allow the financial inclusion of thousands of people who are outside the legal economy”. The initiative aims to create jobs, added Bukele, in a country where “70% of the population does not have a bank account and works in the underground economy”, although there is no shortage of doubts about an operation that tastes like propaganda.
El Salvador, a pioneering country thanks to Bitcoin?
by Amelia Tomasicchio
Bitcoins will thus join the US dollar, the official currency. Remittances from Salvadorans working abroad represent an important slice of the economy, equivalent to about 22% of GDP. According to official reports, in 2020 remittances to the Central American country amounted to 5.9 billion dollars. According to Bukele, Bitcoin represented “the fastest growing way to transfer” billions of dollars in remittances and prevent millions from being lost to intermediaries. “Thanks to the use of bitcoin, the amount received by over one million low-income families increases by several billion dollars every year,” the president said.
From the Salvadoran president’s video message a few days ago to the Bitcoin 2021 conference in Miami, Florida, everything happened quickly. In a very short time, the bill was transmitted and discussed in the Finance Committee of the National Assembly, and then approved without debate by the Parliament largely controlled by the parties that support Bukele. According to the new law, the use of bitcoin will be “free with liberating power, unlimited in any transaction and for any reason required by public or private individuals or legal entities”. In the discussion that took place in the Finance Committee, it was made clear that bitcoin will not replace the dollar. It is, underlined the vice-president of the government party ‘Nuevas Ideas’, “only an additional value”.
It is expected that the exchange rate between bitcoin and dollar is freely fixed by the market, that prices can be expressed in bitcoin, and that all taxes and duties can also be paid with the cryptocurrency. Importantly, exchanges made in bitcoin will not be subject to capital gains tax as is the case with any other legal tender currency. The law also provides that economic operators will have to accept cryptocurrency as a form of payment when it is offered to them by those who buy a good or service. The text of the provision also provides that “without prejudice to the private sector, the State will provide alternatives that allow the user to carry out transactions in bitcoins, as well as access automatic and instant convertibility to the dollar, if required”. Finally, those who “obviously do not have access to technologies that allow bitcoin transactions” are excluded from the obligation to accept cryptocurrency as a form of payment.
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