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Bitcoin is showing recovery at the current resistant level of $36,000 after a price decline period causes by the continuous bad news such as Tesla’s Elon Musk withdrawal from Bitcoin, ban on cryptocurrency trading in China over the past weeks. One of the main factors that cause the cryptocurrency market to rebound is the decision of the El Salvador government to be the first nation in the world to legislate Bitcoin as its legal tender, which has passed the bill through the parliament a few days ago.
Nayib Bukele, the President of El Salvador (Republica de El Salvador), has announced its plans to introduce a bill to make Bitcoin a legal currency next week in a video speech at the 2021 Bitcoin Conference in Miami, USA, on the 5th of June. Just days after the plan was unveiled, El Salvador has taken a quick move to pass the bill to recognized Bitcoin as the country’s official currency.
Out of a total of 84 votes, the bill received the overwhelming support of 64 votes in favor. El Salvador used its national currency, the Colon, from 1919 to 2001 but later introduced the US dollar as its national reserve currency for monetary stability.
With the legalization of Bitcoin as the national currency, the official currency of El Salvador will no longer be just the US dollar but also Bitcoin. In other words, Bitcoin is added to the currency authorized by law and public authorities as a means of payment.
The bill includes a clause that will require all economic entities in El Salvador to accept Bitcoin as payment. In addition, to overcome Bitcoin's price volatility, El Salvador is working towards allowing cryptocurrency to be converted into US dollars immediately. Furthermore, a trust fund of 150 million US dollars will be operated to prevent traders from taking the risk of its price volatility.
El Salvador is also offering Permanent Residency to the immigrant who paid 3 BTC, and said that all Bitcoin transactions will not be subject to capital gains tax. And, of course, taxes will also be allowed to be paid in Bitcoin.
El Salvador’s move on making Bitcoin its legal tender will likely go down in history as one of the most important events in cryptocurrency history. Bitcoin, also known as digital gold, is merely considered a means of hedging and used for storage value instead of a payment method. However, it will soon be used widely as a payment method and the official currency.
For El Salvador, the move to legalize Bitcoin as its national currency set to bring some notable gains:
1. The increase in national wealth and the growth of the national economy through the revitalization of consumer spending
Although El Salvador is the smallest country in Latin America, with a population of almost 6.5 million, the population density is one of the highest in Central America. Due to the high population saturation, many people migrated abroad after the civil war and caused an increased outflow of the population. Therefore, this move will serve as an opportunity for remittances from El Salvadorians residing abroad to take charge of one of the pillars of El Salvador’s economy.
The current overseas remittance system still charges high commissions from custodial and intermediary banks. The recognition of Bitcoin as a legal currency means that El Salvadorians living abroad, who are forced to pay high fees to send dollars through the existing financial institutions, will now send money with lower fees through Bitcoin. President Nayib Bukele said this could save millions of dollars in fees, and this will further generate billions of dollars in income for more than one million low-income households.
2. El Salvador could be the next haven for more crypto-based companies.
Cryptocurrency companies are struggling due to the inadequacy of laws and regulations regarding cryptocurrency and blockchain in their country. As a result, cryptocurrency companies diversified into multiple tax havens countries will want to have their corporate headquarters in El Salvador, promoting the industry actively.
Interestingly enough, Panama Congressman Gabriel Silva recently tweeted, “Panama must not be left behind. To lead innovative technology, we need to support cryptocurrencies,” adding that he is preparing a bill to recognize Bitcoin other cryptocurrencies as fiat currencies.
Now, are you wondering where the wind of “Bitcoin as national currency” that started in El Salvador will blow to next?
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