El Salvador, taking off with its Bitcoin Law
The prophecy has been fulfilled, the DeFi believers saw the first step of the regulation of Bitcoin as legal tender in Latin America materialize. It has been President Nayib Bukele who has promoted the first antecedent of Law for the legal course of a cryptocurrency with the Bitcoin Law in El Salvador.
Although the news has divided opinions, it is inevitable to accept that the Bitcoin Law could initiate a domino effect that motivates the rest of the countries to accelerate the process of acceptance of cryptocurrencies as currencies of legal circulation, given that their use has become widespread in almost all the planet.
The first step has been taken and at Brickken we bring you the most relevant of the ten general and six transitory provisions of the Bitcoin Law.
- The cryptocurrency may be used in any transaction and any title that natural or legal public or private persons required to carry out.
- The exchange rate between bitcoin and the dollar will be freely set by the market.
- All prices may be expressed in bitcoin.
- Tax contributions may be paid in bitcoin.
- Exchanges in bitcoin will not be subject to capital gains tax like any legal tender.
- For accounting purposes, the dollar will be used as the reference currency.
- Every economic agent must accept bitcoin as a form of payment when it is offered by whoever acquires a good or service.
- The State will promote alternatives that allow the user to carry out bitcoin transactions, as well as having automatic and instantaneous convertibility of bitcoin to dollars if they wish.
- The limitations and operation of the alternatives for automatic and instantaneous conversion from bitcoin to dollar provided by the State will be specified in the Regulations issued for this purpose.
- The Executive Branch will create the necessary institutional structure for the purposes of applying this law.
Final and transitory provisions
- The Bitcoin Law will enter into force 90 days after its publication in the Official Gazette of El Salvador.
- Anyone who does not have access to the technology that allows transactions in bitcoin will not be obliged to what is expressed in point 7, as well as the country will promote the means and technologies so that the population can carry out transactions in bitcoin.
- All obligations expressed in dollars that will be pending before the validity of the Bitcoin Law may be paid in bitcoin.
- The Salvadoran State will guarantee through the creation of a trust in the Development Bank of El Salvador the automatic and instantaneous convertibility of bitcoin to dollars.
- Any provision contrary to what is contained in the Bitcoin Law is repealed.
- The period of validity of the Law guaranteed by point 11 is established.
We can deduce that it is a simple and concise Law that leaves many unknowns regarding its implementation, however, the preparation, approval and publication of the Regulation of the Bitcoin Law is pending, so it sounds convenient to maintain our reserves of how they will adapt and modify the articles provided in the Law based on its execution.
For his part, President Bukele announced that the acquisition of US $ 150 million in bitcoin is expected in order to create the trust stipulated in point 14 of the transitory provisions, where said amount represents no more than 3% of what El Salvador receives annually in remittances.
Given the news of the approval of the Bitcoin Law, public opinion has been divided among those who consider that the bill was a hasty decision that required further discussion, since the volatility of bitcoin would represent a failure for the country’s economy, while on the other hand, there are those who describe President Bukele as a brave visionary leader who has put El Salvador in the history of the Blockchain revolution, transforming the economic dynamics of the society we know.
The eyes of the world on El Salvador
El Salvador is now the Sandbox of the world where we will see if the decision to approve said Law is a success for the economy, achieving the financial inclusion of 70% of its population without access to a bank account or, on the contrary, it is the chronicle of a death announced when implementing a Law in a country where the population is closely rooted in the use of cash and the transactional limitations of bitcoin prevent obtaining the desired goal, since bitcoin was not designed as legal tender.
Whatever the result, we will be attentive and closely watching the behavior of the regulation in El Salvador, which regardless of whether it has been hasty or successful in a timely manner, has released the brake on a train that was traveling slowly, accelerating at a slow pace. from which there is no turning back.
From Brickken, we take this news with emotion, since it is a quantitative and qualitative leap for the adoption of blockchain technology, not only by individuals and companies, but also by the States themselves. We have no doubt that the acceptance as legal tender of cryptocurrencies will open endless possibilities for the tokenization of assets.
If you want to know more about tokenization, we invite you to download our report.