How El Salvador could change the landscape of investing.
El Salvador became the first country in the world to adopt bitcoin as legal tender after Congress on Wednesday approved President Nayib Bukele’s proposal to embrace the cryptocurrency, a move that delighted the currency’s supporters.
With 62 out of 84 possible votes, lawmakers voted in favor of the move to create a law to adopt bitcoin, despite concern about the potential impact on El Salvador’s program with the International Monetary Fund.
Bukele has touted the use of bitcoin for its potential to help Salvadorans living abroad to send remittances back home, while saying the U.S. dollar will also continue as legal tender. In practice, El Salvador does not have its own currency.
“It will bring financial inclusion, investment, tourism, innovation and economic development for our country,” Bukele said in a tweet shortly before the vote in Congress, which is controlled by his party and allies.
“One of the reasons we passed the bitcoin law is precisely to help people who send remittances,” said Bukele, adding the high costs of commissions traditionally associated with sending money home would be eliminated by using the cryptocurrency.
He said the idea was to build a bitcoin mining hub around the country’s geothermal potential. He also said that El Salvador would offer citizenship to people who showed evidence they had invested in at least three bitcoins.
So what exactly does this mean for US investors that have adopted bitcoin? Absolutely nothing. You tax rates will be the same regardless of bitcoins push towards being a national currency.
However this could not happen at all entirely as the world bank stated “We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes,” a World Bank spokesperson told the Reuters news agency via email.
“While the government did approach us for assistance on Bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings,” they added.
It comes after El Salvador’s Finance Minister Alejandro Zelaya said on Wednesday that the country had asked the World Bank for technical assistance with the implementation of the cryptocurrency as an official method of payment.
Now no one has really has evaluated as to what will happen with bitcoins price in connection to to El Salvador’s move towards crypto. As we get closer to the targeted date Sept 7th. 2021.
This move could easily send bitcoin flying as on average 2% of El Salvador’s GDP (roughly 6billion dollars) will be moved yearly just in remittance. Combine this and the actual fact that millions of people will be doing transactions every day in bitcoin… As time winds down we need to keep our heads on a swivel.
