Now in El Salvador, the two official currencies are the US dollar and Bitcoin. It’s time to figure out what will follow this event and which countries are ready to accept Bitcoin too
Now El Salvador officially accepts Bitcoin as a means of financial settlement within the state. The decree was adopted by the country’s parliament and will enter into force in 90 days. This time will be spent on creating the necessary infrastructure. According to the leader of the country, everyone is obliged to accept Bitcoin by law on a par with the US dollar. Recall that the USD has been the official currency in this Central American country for about 20 years.
After the news was released, the price of Bitcoin immediately increased by 5% with an increase in the price of +643 dollars. The current cost of 1 BTS on Binance is almost 35 thousand US dollars at the moment.
Why does El Salvador need it?
El Salvador is too small and too poor a country to have any weight on the world stage. They don’t matter to the crypto world. El Salvador hasn’t even had its currency since 2001 due to hyperinflation. All payments in the country are made in US dollars. Almost 3/4 of the country’s income is based on remittances from labor migrants who send earned money from other countries. Accordingly, the official status of Bitcoin in this country is intended to facilitate cash flows from citizens of the country from abroad.
That is, this news is important for El Salvador, but not for the whole world. Experts advise not to rejoice with restraint because the processes with Bitcoin in developed countries are of key importance. In the civilized world, there is now mostly a discussion about strict regulation and even the fight against digital assets.
Which countries will do the same in the future?
Despite everything, we have witnessed a historic event. The El Salvadorian experience marks the next step for digital currencies. It’s one thing when bitcoin is used by private owners, and quite another when national regulators come into play. Ideally, El Salvador’s status on the world stage is irrelevant, and this event is worth celebrating. Moreover, many other countries are now ready to follow in the footsteps of this brave country. We are talking about states with similar problems that are dependent on the labor of their migrant citizens in more prosperous countries. Alternatively, these could be countries under siege of economic sanctions from the United States and Europe.
From the point of view of the global economy, such processes are also unimportant due to the degree of distribution of digital resources. Almost all global Bitcoin assets are concentrated in the hands of a limited circle of investors and traders in North America, excluding Mexico, as well as Europe and Asia.
Interestingly, Panamanian Congressman Gabriel Silva spoke about the need for Bitcoin two days earlier. In his opinion, official Bitcoin can stimulate a boom in the development of modern technologies and entrepreneurship in this also small country of Central America. Panama will also accept Bitcoin soon because the information about the upcoming bill was recently confirmed. Similar statements are leaked from the government of Paraguay.
What this event will entail for investors?
There is an opinion that the event will negatively affect the owners of bitcoin in terms of taxation. For example, the IRS will be able to treat Bitcoin as a legitimate foreign currency.
If this becomes a reality, then all trading operations and investments using bitcoin will be subject to standard taxes. Bitcoin is now associated with a low capital gains tax rate for assets held for more than a year.
It is known that in 2014, Bitcoin was recognized in the United States as a property, and not as a currency with applicable federal income tax provisions. This status was associated with the lack of official recognition of Bitcoin in all countries of the world. El Salvador’s experience provides a legitimate basis for reconsidering this position.
Although, the recognition of bitcoin by El Salvador is not significant enough to revise the status of the most popular cryptocurrency in the United States. This would happen immediately if in the place of El Salvador there were, for example, any major country in Europe, India, Brazil, Japan, and so on. However, if a chain reaction among the countries of the third world starts, the United States will be forced to bring this issue up for consideration.