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El Salvador has become the first country to make Bitcoin a legal tender, and President Nayib Bukele praised this as a historic step towards financial inclusion and economic growth in this poor Central American country .
The country’s legislature controlled by Buckler passed the bill on Wednesday with 62 votes out of 84. “history!“The 39-year-old authoritarian president wrote on Twitter.
In a country where 70% of Salvadorans do not have access to traditional financial services, Bitcoin entrepreneurs are excited about this decision. Given the volatility of cryptocurrencies, analysts are cautious. Some people say that this may even put a pending IMF plan at risk.
“It just feels like a bad idea… In fact, El Salvador will have two currency systems operating in the country, but will not control either of them,” said Bipan Rai, currency analyst at CIBC.
The law stipulates that “in order to promote the country’s economic growth, it is necessary to authorize the circulation of a digital currency whose value is in full compliance with free market standards, so as to increase the country’s wealth and benefit the most people. Residents.”
According to the law, Bitcoin can be used to purchase or pay taxes, and Bitcoin exchanges are not required to pay capital gains tax.
Some poor countries have issued cryptocurrencies to end their dependence on the U.S. dollar, and El Salvador adopted it as legal tender in 2000.
“It has shortcomings,” said Hugo Renaudin, a cryptocurrency entrepreneur. “From a monetary point of view, it relies on another currency… The transaction fees for small purchases are quite expensive, so you may not be able to buy coffee with Bitcoin-it will cost more than coffee-but you can buy a set Apartment.”
Bitcoin is trading at $34,300, a 50% drop from the peak in April.
Salvadorans are highly dependent money transfer. Payments from family members in the United States account for one-fifth of the GDP, according to World BankJuan Pablo Thieriot, CEO of Uphold, said that Bitcoin can make this process cheaper. Uphold is a financial service platform that supports payments and transactions in Bitcoin or other currencies and tools.
“Any country that supports Bitcoin as a legal tender will have exchanges in every corner, so you can use Bitcoin on your phone, scan the QR code, and walk away with the U.S. dollar,” he said.
“Merchants will do the same thing,” he added, noting that the fast-food chain Burger King already provides bitcoin payment services in Venezuela, and Venezuela’s bolivar currency has been ravaged by the economic collapse.
Venezuela announced its oil-backed cryptocurrency plan in 2018 oil, Trying to circumvent US sanctions, but has been unsuccessful.
Siobhan Morden, head of fixed-income strategy at Amherst Pierpont Securities in Latin America, said this is in line with Bukele’s tendency to “flashy and unexpected announcements that seem to contradict or at least question the plan of the economic team. She added that it could also jeopardize the IMF’s plan for more than a year.
She wrote in a report to her clients: “President Booker is not a man of compliance. He has an active Twitter account and a hostile attitude, which means a high degree of uncertainty in policy management.” “The Bitcoin Project.” in An increasingly authoritarian regime It may only exacerbate concerns about corruption, money laundering and the independence of regulators. “
The government will set up a trust in the El Salvador Development Bank to realize the automatic conversion of Bitcoin and U.S. dollars. The law will take effect 90 days after it is published in the official gazette.
Additional reporting by Katie Martin in London
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