El Salvador is attempting to become the first nation to use bitcoin as legal tender.
President Nayib Bukele announced that he would submit a bill to the Salvadoran legislature — which his “Nuevas Ideas” party presently controls — to make the cryptocurrency a valid medium of exchange in the small Central American nation.
As a cryptocurrency, bitcoin is neither managed by a central government nor tethered to a commodity such as gold or silver. It is transmitted digitally and protected from counterfeiting via encryption.
“Next week, I will send to Congress a bill that will make bitcoin a legal tender in El Salvador,” said Bukele in a video debuted at the Bitcoin 2021 conference in Miami. “This will generate jobs and help provide financial inclusion to thousands outside the formal economy.”
— Nayib Bukele 🇸🇻 (@nayibbukele) June 5, 2021
Bukele later announced that the nation would not charge capital gains taxes on bitcoin and offer “immediate permanent residence for crypto entrepreneurs.”
1. Great weather, world class surfing beaches, beach front properties for sale.
2. One of the few countries in the world with no property tax.
3. No capital gains tax for #Bitcoin, since it will be a legal currency.
4. Immediate permanent residence for crypto entrepreneurs. https://t.co/j3eugJQCMd
— Nayib Bukele 🇸🇻 (@nayibbukele) June 6, 2021
El Salvador is one of a few countries — such as Ecuador and the Federated States of Micronesia — to use the United States dollar as their official currency. Other countries — such as Panama and Belize — peg the value of their own currencies against the dollar. Upon passage of the legislation, El Salvador would continue to use the dollar alongside bitcoin.
Jack Mallers — CEO of bitcoin wallet company Zap — stated during the conference that his firm had been improving El Salvador’s GDP “in real time” by helping citizens join the platform.
“Over 70% of the active population in El Salvador doesn’t have a bank account,” explained Mallers. “They’re not in the financial system. They had a huge problem of financial inclusivity and providing their citizens with basic human freedom.”
More than 20% of economic activity in El Salvador is driven by remittances — funds sent home by migrant workers that are often subject to large international transfer fees. Mallers stated that bitcoin would help Salvadorans keep more of their wages.
In a particularly emotional portion of the speech, Mallers informed his audience that he had been helping officials in El Salvador to develop legislation “to help these people, to give them hope, to give them a quality of life and that you can live where you’re born in — you don’t have to leave, and when you send money home, they’re not going to take f*cking half of it.”
Reading aloud from a draft of the legislation, Mallers also emphasized that bitcoin is decentralized from fiat currencies — such as the dollar.
“Central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador,” reads the bill. “In order to mitigate the negative impact from central banks, it becomes necessary to authorize the circulation of a digital currency with a supply that cannot be controlled by any central bank and is only altered in accord with objective and calculable criteria.”
Indeed, the inflation rate for the dollar has surged in the wake of aggressive quantitative easing from the Federal Reserve — the central bank of the United States — and massive federal spending proposals from the Biden administration.
At the time of publication, the price of bitcoin is roughly $35,000. The cryptocurrency traded for over $60,000 in April.