El Salvador becomes the first country to adopt bitcoin as a legal entity

El Salvador became the first country to legally sell bitcoin, which President Nayeb Buquel described as a historic step towards financial inclusion and economic growth for a poor Central American nation.

The country’s legislature, which oversees Buckle, passed the bill by 62 votes to 84 on Wednesday. «History:“, Wrote the 39-year-old authoritarian president on Twitter.

Bitcoin entrepreneurs were inspired by the decision in a country where 70 percent of Salvadoran people do not have traditional financial services. Analysts were wary of cryptocurrency volatility, with some saying it could even jeopardize the IMF’s upcoming program.

“It simply came to our notice then. “In fact, El Salvador will have TWO foreign exchange regimes in the country, neither of which will be controlled,” said Bipan Rye, CIBC Currency Analyst.

The law stated that “in order to stimulate the nation’s economic growth, it is necessary to allow the circulation of digital currency, the value of which meets exclusively free market standards in order to maximize the national wealth.” residents. “

By law, bitcoin can be used for purchases or taxes, and bitcoin exchanges are not subject to capital gains tax.

Some poor countries sell cryptocurrencies as a way to end their dependence on the dollar, which Salvador legally paid for in 2000.

“It has its drawbacks,” said crypto entrepreneur Hugo Renauddin. “From a monetary point of view, it relies on another currency. , and transaction fees are quite expensive for small purchases, so you may not be able to buy coffee with bitcoin. The fees would be higher than coffee, but you can buy an apartment. ”

Bitcoin traded at $ 34,300, which is 50% less than its peak in April.

The Salvadoran people are very dependent on it money transfersUS family members’ payments account for one-fifth of gross domestic product World Bank:“Bitcoin can make the process cheaper,” said Juan Pablo Thierott, CEO of the Uphold Financial Services Platform, which allows payments to be traded “bitcoin or in other currencies”.

“Any country that supports bitcoin as a legal payment will have an exchange at every corner so you can log in to your phone with bitcoin, scan a QR code and leave in dollars,” he said.

“Traders will do the same,” he said, noting that Burger King, a fast food chain, has already offered bitcoin payments in Venezuela, whose bolivar currency has plunged due to the economic collapse.

In 2018, Venezuela unveiled an oil-backed currency, The Petro, trying to circumvent US sanctions, but it fails.

Siobhan Morden, head of Amherst Pierpont Securities’ Latin America fixed income strategy, said this was in line with Buchelle’s “shocking, unexpected statements that seem to contradict or at least call into question the economic team plan”. It could also jeopardize the International Monetary Fund program, which has been operating for more than a year, he added.

“President Buquelle is not a conformist. “With an active antagonistic Twitter account, which implies a high degree of uncertainty in policy management,” he wrote in a letter to customers. “Bitcoin plans below increasingly autocratic regime It is possible that there are only complex concerns about corruption, money laundering, and the independence of regulatory agencies. ”

The government will create a credential in the Bank of El Salvador Bank for the automatic conversion of bitcoin into dollars. The law will enter into force 90 days after its publication in the official bulletin.

Additional report by Katie Martin in London

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