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El Salvador, the first country with Bitcoin as legal tender

The Salvadoran Congress approved this week the initiative of the president, Nayib Bukele, and they became the first country to adopt a cryptocurrency as a form of official transaction.

Bitcoin coin on some banknotes and a credit card

More and more investors rely on cryptocurrencies to allocate part of their income and obtain large profits. Photo: Unsplash

LatinAmerican Post | Ariel Cipolla

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Leer en español: El Salvador, primer país con Bitcoin como moneda de curso legal

It is clear that Bitcoin revolutionized the world economy. More and more investors rely on cryptocurrencies to allocate part of their income and obtain large profits.

What we have not seen until now is its implementation in the public sector, that is, converting Bitcoin into “legal tender cryptocurrencies” approved by countries. This is what Nyaib Bukele, president of El Salvador, has just changed by regulating the use of Bitcoin within the country. Now it will be possible to pay taxes or any commercial obligation through this new alternative.

The law determined that "every economic agent must accept bitcoin as a form of payment when it is thus offered by whoever acquires a good or service. In addition, its price will be set solely by the market, a quite volatile one as it has been shown in recent months.

 

El Salvador and Bitcoin

At a Bitcoin conference in Miami, Bukele mentioned that he would submit a proposal to congress for Bitcoin to become legal tender. With a congress completely dominated by its supporters, this initiative was practically taken as an order and passed with agility.

Also read: Why is Nayib Bukele so popular?

Bukele assured that in the short term, this measure "will create jobs and promote financial inclusion for thousands who are outside the formal economy." In the medium and long term, it will mean “pushing humanity in the right direction”, since, from their point of view, the future will be dominated by cryptocurrencies.

To understand this decision, we must understand a little how the economic system of this country works. The US dollar is the official currency within El Salvador, which makes the country dependent on the United States. Especially considering that more than a quarter of the country's citizens live or work on North American lands.

For example, in the pandemic, we had seen that more than 6,000 million dollars had been sent from the United States to El Salvador. In his Twitter account, Bukele explains that this will not lose money with intermediaries, since the transactions will be safe and direct.

Even Bukele hopes that El Salvador becomes a "dreamland" for those who decide to undertake. In terms of tax benefits, it means that the emergence of Bitcoin as an official currency is added to the non-existence of taxes on Bitcoin's earnings, which will encourage crypto entrepreneurs.

1. Great weather, world class surfing beaches, beach front properties for sale.
2. One of the few countries in the world with no property tax.
3. No capital gains tax for #Bitcoin, since it will be a legal currency.
4. Immediate permanent residence for crypto entrepreneurs. https://t.co/j3eugJQCMd

— Nayib Bukele ???????? (@nayibbukele) June 6, 2021

It should be noted that this movement of confidence of the countries on the currency could generate a significant increase in the value of the cryptocurrency. As with the reactions of the markets, where Elon Musk's tweets generated rises or falls according to his statements, something similar could happen with this political decision.

If we take into account that, according to a report by Coin ATM Radar, there are more and more ATMs in Latin America that allow withdrawing money in crypto format, this could mean a blow to confidence within the region, which would position it as a pioneer to implement a new purely digital payment method.

The truth is that this 39-year-old president, known as a “millennial president”, and whom many describe as having a “right-wing populist” vision that is quite open to the market, continues to cause news. Bukele's decision could mean a change in the landscape for the currencies of Latin America and the world.

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