On June 9, El Salvador’s President Nayib Bukele announced that the Bitcoin Law he authored has been approved by an overwhelming majority (62/84) of the Salvadoran Congress, meaning it will take effect in 90 days and Bitcoin will become legal tender in the country.
So what does this really mean?
I believe that for many people, the country of El Salvador is still quite unfamiliar, and the author was flabbergasted when he heard the news.
According to Wikipedia, El Salvador is a country located in the north of Central America with a national area of 21,393 square kilometers, which is roughly comparable to our city of Beijing, while according to 2018 statistics, the country’s population is around 6.42 million, which is basically the size of a medium-sized city.
So, what exactly is in this adopted Bitcoin Law?
The Bitcoin Law
Specifically, the following.
- According to Article 102 of the Constitution of the Republic, the state has the obligation to increase the wealth of the country for the benefit of the general population.
- The U.S. dollar was adopted as legal tender pursuant to Decree No. 201, Volume 349, Government Gazette No. 241 of December 22, 2000.
- Approximately 70% of the population does not have access to traditional financial services.
- The State has the obligation to advance financial inclusion for its citizens in order to better safeguard their rights.
- In order to promote the country’s economic growth, it is necessary to approve the circulation of a digital currency whose value is fully compatible with the standards of the free market in order to increase the country’s wealth for the benefit of the largest number of inhabitants.
- According to the previous considerations, it is crucial to introduce basic rules regulating the legal process of Bitcoin.
Article 1, the purpose of this law is to establish Bitcoin as an unrestricted legal tender with free rights, whose use is not restricted in any transaction that needs to be carried out by public or natural or legal persons.
The foregoing is without prejudice to the application of the Monetary Integration Law.
Article 2, the exchange rate between Bitcoin and the US dollar, will be freely determined by the market.
Article 3, prices may be expressed in bitcoins.
Article 4, tax contributions may be paid in bitcoin.
Article 5, Bitcoin transactions would not be subject to capital gains tax, just like any legal tender.
Article 6, for accounting purposes, the US dollar will be used as a reference currency.
Article 7, all economic agents must accept bitcoin as a method of payment, whether for goods or services.
Article 8, without prejudice to the behavior of the private sector, the State shall provide alternatives that allow users to conduct bitcoin transactions and, if they so desire, to automatically and instantaneously convert bitcoins to U.S. dollars. In addition, the State shall facilitate the necessary training and mechanisms so that people can conduct Bitcoin transactions.
Article 9, the limitations and operational terms of the alternative to automatic and instantaneous conversion of Bitcoin to U.S. dollars provided by the State will be set forth in regulations to be issued for this purpose.
Article 10, the Executive Branch will establish the necessary institutional structure for the application of this Law.
Entry into force and transitional provisions
Article 11, the Central Reserve Bank and the Financial Supervisory Authority shall issue the corresponding regulations within the period established in Article 16 of this Law.
Article 12, persons who, due to obvious and well-known facts, are unable to carry out bitcoin transactions are excluded from the obligations set forth in Article 7 of this Law. The State will promote the necessary training and mechanisms to enable the population to access bitcoin transactions.
Article 13, all debts expressed in U.S. dollars that existed prior to the date of entry into force of this Law may be paid in Bitcoins.
Article 14, Prior to the entry into force of this Law, the State will guarantee the automatic and immediate conversion of Bitcoins into U.S. dollars through the establishment of a trust in the Bank of El Salvador (BANDESAL), which is required for the provision of alternatives mentioned in Article 8.
Article 15, this Law shall be specific in its application to other laws regulating the matter, and any provision that contradicts this Law shall be repealed.
Article 16, this Law shall enter into force 90 days after its publication in the Official Gazette.
Published in the Blue Hall of the Legislative Chamber of San Salvador on June 8, 2021.
How can I put it, the content of this bill is indeed a bit hardcore, and this is the first time I’ve seen a country in full support of bitcoin, so it’s no wonder that the bitcoin bigwigs had a collective orgasm after seeing this news.
(Lightning Labs founder elizabeth stark also speculated that these transactions would almost inevitably happen on the lightning network)
If you look at this alone, wouldn’t you think this country would be a bitcoin player’s paradise?
With security a concern, can Bitcoin help with financial inclusion?
According to some tourists who have traveled to the country, there are many gangs in El Salvador, and they often fight and kill each other in the streets, and many people are killed every day in the country, and robberies are commonplace.
And these problems are essentially due to the local government’s corruption and incompetence, bad security and economic backwardness. As President Nayib Bukele pointed out in the Bitcoin Law, 70% of the country’s population does not have access to traditional financial services, so can this situation be improved with the acceptance of Bitcoin as legal tender?
Assuming that the country’s residents use bitcoin for everyday payments via the lightning network, we can expect that many local people will have access to financial services that were previously inaccessible, which does have the potential to benefit this segment of the population, but there is a threshold for related applications, which will require significant promotion by technical staff as well as the local government.
And from the rest of the bill, it is likely that its direct benefit will be to those bigwigs who already own bitcoin in the U.S., as converting bitcoin to U.S. dollars in the U.S. region is subject to a large capital gains tax, while in El Salvador, it is exchanged by financial institutions such as the country’s central bank, and traders are not required to pay capital gains tax, provided, of course, that they keep themselves safe.
So, will more small countries learn from this regulatory strategy? A Panamanian lawmaker has also reportedly put forward a proposal aimed at bringing bitcoin within the scope of the country’s legal tender.
What’s coming, will still come.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bitcoin-is-officially-legal-tender-in-the-country-of-el-salvador-what-does-this-mean/
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