On June 8, 2021, the Legislative Assembly of El Salvador approved the Bitcoin Law promoted by President Nayib Bukele, which will allow the legal course of cryptocurrency. In this way, the Central American country became the first in the world to recognize this cryptoasset as a legal exchange currency.
The initiative, which only establishes the legal course of bitcoin and not of other cryptocurrencies or the underlying projects, was approved with the votes of 62 deputies of the 84 in Parliament and must take effect 90 days after its publication.
According to the Cointelegraph portal, the news caused Bitcoin to rise 11.98% of its price. In the analysis, he describes that, from a financial point of view, the adoption of Bitcoin as a legal tender also raises important legal and financial issues.
One of the questions in this regard is whether this decision will mean the recognition of Bitcoin as a foreign currency. If so, will Bitcoin transactions be subject to a financial transaction tax?
Whatever the scenario, El Salvador’s decision is a historic event for the cryptocurrency industry. Bukele mentioned that his main inspiration for promoting this law was the project that has been operating for more than two years on El Zonte beach, in the south of the country, where some businesses already accept bitcoin as a form of payment.
However, the speed of approval and the absence of prior public analysis have caused great uncertainty about what this will mean for Salvadorans and other countries, financial organizations and foreign investors that maintain relations with El Salvador.
As there are divided criteria on its implementation, uncertainty grows as to how this law will work and if it will actually be a success. However, there are some advantages to this project. One of the main advantages, according to the Salvadoran president, is that, thanks to bitcoin transactions, the population could save the commissions of intermediaries in the remittances they receive from abroad and that can amount to up to 30% of the money sent.
The president also highlighted that around 70% of the population does not have a bank account and works in the informal economy, so cryptocurrencies could improve their financial inclusion.
Although there is skepticism about the measure and its implications, the truth is that the small Central American country has become the point of attention of promoters and detractors of Bitcoin. Its success or failure would be decisive for the use of crypto to spread or not in the future.