Sunday, July 21, 2024

El Salvador Assembly Gives Legal Tender To Cryptocurrency

The Legislative Assembly of El Salvador approved the so-called Bitcoin Law with a qualified majority, becoming the first country in the world to give legal tender to the first cryptocurrency.

This Tuesday, June 8, near midnight in El Salvador, the main legislative body of the Central American country shared the announcement through its Twitter account, ensuring that 62 of the 84 deputies of the country voted in favor of the Law, which was just introduced hours earlier by President Nayib Bukele.

The legal initiative was previously disclosed by President Bukele , also through Twitter. In the document it can be read that bitcoin may be used “in any transaction and to any title that natural or legal persons, public or private, require to carry out.” With this it is understood that not only individuals and companies will be empowered to use bitcoin as currency, but also the organs of the public administration and other entities of the State.

It also establishes that “every economic agent must accept bitcoin as a form of payment when it is offered to him by whoever acquires a good or service”, although later on they exclude from the obligation those who do not have the necessary infrastructure to do so.

The document also establishes that the exchange rate between bitcoin and the dollar will be established by the free market, resulting from the agreement between buyers and sellers of the cryptocurrency. For its part, all prices may be expressed in bitcoins, although the dollar will be kept as the reference currency for accounting purposes.

In tax matters, as the national executive had established in previous days , it is established that “exchanges in bitcoin will not be subject to taxes on capital gains , like any legal tender,” with which El Salvador It stands as the first country to eliminate tax burdens on capital gains resulting from the free variation in the price of bitcoin.

On the other hand, if the resident so wishes, they can pay their tax contributions of another nature through cryptocurrency. And the payment obligations currently in force can also be canceled in bitcoin.

The State will provide education and infrastructure
With the law, the State undertakes to advance the educational campaign essential for the population to have the necessary knowledge to adapt to this new monetary reality. This is extremely important, while ignorance of technology is one of the main limits that citizens have expressed through social networks.

Likewise, the State will provide infrastructure so that the processing of transactions is carried out without difficulties, without limiting the initiatives of the private sector. Similarly, the public sector will offer automatic convertibility from bitcoin to dollar for those citizens who prefer to keep the US currency. To do this, they will create a trust in the Development Bank of El Salvador (BANDESAL).

The guidelines for this conversion will be specified in a specific regulation to be designed by the Central Reserve Bank and the Superintendency of the Financial System. Said regulation will be issued within a period of ninety days after the publication of the Bitcoin Law in the Official Gazette of the Republic, at which time all the aforementioned legal provisions would take effect.

As disclosed in recent days through CriptoNoticias, El Salvador’s Bitcoin Law seeks to attract foreign investors from the flourishing Bitcoin industry to the Central American country, as well as facilitate the sending of remittances, even in scenarios of financial blockages. Already, many representatives of the bitcoiner space have expressed their interest in opening offices in a country that offers them favorable conditions to develop their businesses.

Since now, President Bukele has begun to establish ties with the bitcoiner community, not only with those who advance Bitcoin Beach in the town of El Zonte, but with companies such as Zap by Jack Mallers and even Blockstream, who put their satellites to access the Bitcoin network available to the country.

Even a few hours after the Bitcoin Law was approved, Bukele participated in a Twitter space opened by the founder of Coin Metrics, Nic Carter, where he gave details to the community about the new legislation.

It should be noted that the only cryptocurrency mentioned in the legal framework is Bitcoin, so it is unknown what the regulatory status of other crypto assets in the country will be.

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