Salvadoran President Nayib Bukele has sent a message saying he has submitted a draft bill to the country’s legislature to make bitcoin legal tender. At noon, Nayib Bukele said the bill is currently being debated, but since his party has 64 of the 84 seats, there is almost a “100 percent chance” that it will pass, and he expects to sign the law later tonight or first tomorrow.
(Tweeted by Nayib Bukele)
The bill will take effect 90 days after it is published in the Official Gazette, which means that El Salvador will be the first sovereign country to adopt bitcoin as a fiat currency. As soon as the news broke, bitcoin, which had been sluggish for days, began its upward march, rising more than $1,000, or more than 3%, in an hour.
Draft signed by Nayib Bukele
However, Miguel Kattán, El Salvador’s Minister of Commerce and Investment, said in a report in the local newspaper El Mundo on Monday, “The U.S. dollar will continue to be legal tender in El Salvador. Daily operational operations can be settled in bitcoin, and of course in relation to its dollar value.”
El Salvador Embraces Bitcoin and Crypto Finance
In terms of implementation details, according to the bill, when bitcoin becomes legal tender, the price of goods can be expressed in bitcoin; any economic entity must accept bitcoin as payment; and bitcoin transactions will not be subject to capital gains tax and can be taxed in cryptocurrency for tax payments.
In addition, due to the volatility of the bitcoin price, the US dollar will be used as a reference currency for accounting purposes; the exchange rate between bitcoin and the US dollar will be freely determined by the market. Pending the bill’s entry into force, officials will guarantee the automatic and immediate exchange of bitcoin to the U.S. dollar through the creation of a trust fund at the Banco de Desarrollo de El Salvador (BANDESAL), and Nayib Bukele revealed the government’s intention to hold the equivalent of $150 million in bitcoin in the trust fund to cover merchants’ risks.
The bill also delineates responsibilities for El Salvador’s state functionaries. The government is to provide the necessary training and mechanisms to enable people to acquire bitcoin through transactions; the Central Reserve Bank and the Superintendency of Finance, should issue the corresponding regulations to implement the bill within a specified period.
However, residents of El Salvador are divided over the bitcoin adoption bill. Some Salvadoran residents are excited about the idea of Bitcoin being considered legal tender, while others fear it could be nothing more than a tool for corrupt officials.
Recently, the small Central American country of El Salvador has been making frequent appearances in the crypto market. At last weekend’s Bitcoin 2021 conference, Salvadoran President Nayib Bukele was present via Zoom Cloud. At the time, Nayib Bukele revealed that he was planning to submit a bill that would recognize bitcoin as legal tender. The bill has also raised eyebrows in the crypto market as it is almost certain to be approved as Bukele’s newcomer party holds a majority in Congress.
Nayib Bukele has physically taken up the cause, changing his avatar to a laser eye image in his Twitter account to spread the word about Bitcoin. (Odaily Daily Planet note: Laser Eye is a bitcoin spreading stunt that has sprung up on Twitter this year.)
(El Salvador President Nayib Bukele)
In addition to turning Bitcoin into a legal tender, El Salvador has also been friendly to crypto market investors. nayib Bukele has said that El Salvador will offer instant permanent residency to crypto entrepreneurs. “Those who invest 3 BTC in El Salvador will be granted permanent residency.” This news, too, was widely retweeted by a host of influential figures in crypto finance, including CZ (Zhao Changpeng), founder of Coinan, and Sun Yuchen, founder of Wavefield.
After the bill passed today, Sun Yuchen tweeted, “I am now a glorious Salvadoran fiat currency holder, I am firmly optimistic about the development prospects of El Salvador and intend to exchange all my future dollar holdings for local Salvadoran fiat currency.”
Why was it El Salvador that took the first step?
If it weren’t for today’s Bitcoin legalization bill, many people might not have heard much about El Salvador.
As a small coastal country in Central America, El Salvador covers only 21,300 square kilometers, roughly the size of Beijing and Shanghai combined, and has a population of less than 7 million, less than a third of Beijing’s resident population.
In terms of politics, El Salvador has been under colonial rule for a long time, and after independence, coups and dictatorships continued to emerge until 1992, when a truce was reached and peace was negotiated; in terms of economy, El Salvador is mainly agricultural, mainly producing coffee and cotton, with an annual GDP growth rate of less than 2%, making it a truly backward region; in terms of currency, El Salvador does not have a sovereign currency and has always relied on the US dollar for settlement.
El Salvador is at the forefront of the crypto-finance market thanks to its current president, Nayib Bukele.
Nayib Bukele, 39, comes from the Grand Alliance for National Unity (GANA) – a reformist party that aims to change the country’s backwardness and won the presidential election in 2019. Since taking office, Nayib Bukele has continued to implement the New Deal in the political and economic spheres, focusing on improving infrastructure.
Because El Salvador is a cash-based economy, about 70 percent of the population does not have a bank account or credit card. Existing services charge 10 percent or more for international transfers, which sometimes take days to arrive and sometimes require in-person withdrawals.
To change the backward financial status quo, Nayib Bukele has opened a green channel for cross-border payments for crypto finance. Strike, a startup owned by Bitcoin Lightning Network wallet Zap, has launched a Bitcoin Lightning payments app in El Salvador; Hipotecario, a state-owned bank in El Salvador, has also been using RippleNet for real-time cross-border payments since March of this year.
With Bitcoin gaining more and more attention from financial and technology professionals this year, Nayib Bukele also realized that this would be a great window to showcase it to the outside world. El Salvador can leverage virtual assets such as Bitcoin to attract foreign investors to the country, which can lead to development and economic growth. This is what led to the introduction of today’s bill to synthesize bitcoin into fiat currency.
El Salvador is Spanish for “the savior”, and time will tell if Nayib Bukele’s new policy will be the “savior” of the country’s economy.
Central America Becomes a New Crypto Finance Paradise
In fact, in addition to El Salvador’s Nayib Bukele, a number of Central and South American dignitaries have expressed interest in bitcoin, including Paraguayan Congressman Carlitos Rejala, Panamanian Congressman Gabriel Silva, Argentinean Neuquén representative Francisco Sánchez, Brazilian Fábio Maia Ostermann, elected member of the Legislative Assembly of Rio Grande Do Sul; Jehudi Castro Sierra, presidential advisor and deputy minister of the digital economy in Colombia; Indira Kempis Martinez, senator from the majority party in the state of Nuevo León, Mexico; and Julio Eduardo Eduardo, deputy minister of economic inclusion in Ecuador. Deputy Minister of Economic Inclusion Julio Eduardo Clavijo Acosta, among others.
And, all of these countries have the same commonalities: formerly colonized and currently underdeveloped economies with no financial baggage; high inflation and weak credibility of their sovereign currencies. As a result, they are more open and inclusive to crypto finance.
(Venezuela Pushes for Petrodollar)
Back in 2017, Venezuela, located in South America, officially announced that it was going to release a cryptocurrency, ‘petrocoin’, backed by the country’s oil and mineral reserves, with the aim of breaking the economic blockade of the United States. However, in the end, Petrocoin did not really gain international recognition, nor did it bring Venezuela the international financing it wanted, and was basically declared a failure.
Of course, the failure of Petrocoin does not represent the failure of cryptocurrencies. At present, several tokens including BNB and DASH are also undertaking cross-border payment functions in Central America. After El Salvador, perhaps more and more countries in the Americas will follow the path of legalized Bitcoin. For the crypto market, it certainly has a strong positive effect.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bitcoin-is-now-part-of-the-fiat-package-but-why-el-salvador/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.