At the Bitcoin 2021 Conference held in Miami, El Salvador President Nayib Bukele announced to the world that his country wants to raise Bitcoin to national currency status. The news was saved for the last day of the event as a big surprise promised to the 10,000 participants. Bukule later confirmed that the lower house of representatives is working on a Bitcoin bill that would allow the flagship cryptocurrency to become the legal tender in the region.
Only a few hours after the bill was presented, the unicameral legislative assembly voted heavily in favor of the Bill. Bukele is a representative of the political party called Nuevas Ideas. NI has claimed a good number of seats in the legislative lobby during the last election. Therefore, the Bitcoin legal tender bill was able to score 62 out of the 84 voting positions. The bill would be forwarded to Bukule as a formality in the next ten days to be signed into the law.
What Components of Bitcoin Legal Tender Bill will Impact the Overall Growth of the Market
According to Ulrik K. Lykke from ARK36, Bitcoiners would soon be able to argue that the beacon coin needs to be recognized as a foreign currency. However, due to the decentralized nature of the cryptocurrency, it would still not be taxable. On the other hand, when Bitcoin becomes a legal tender in Salvador, it would mean that the local government would have to accept taxes, legal fines, and license fees. Meanwhile, the merchants of the country would have to accept Bitcoin for everyday trade transactions.
Under this pretext, it could become easier for Taxation authorities to implement taxes on the income generated by Bitcoin transactions as a monetary commodity. As per the clauses in the bill, the Salvador government would also start a new trust through the Development Bank of the country. With the help of trust, the citizens would be able to quickly convert Bitcoin into greenbacks.
Bitcoin could Help a Struggling Economy to Get Back on its Feet
In 2001, the native currency of Salvador, the colon, was permanently replaced by the US dollar to salvage the economy. However, since the US Central bank has started to print more fiats to fill up the economic gap created by the COVID pandemic, the value of a dollar is expected to drop exponentially. Under these circumstances, Bitcoin could offer a store of value for investors.
On the other hand, the immigrants send about $6 billion in remittance every year to their home country. Due to the involvement of third-party services like Western Union and others, this amount is cut down by 20% in lieu of transaction fees. According to Bukele, by switching to Bitcoin, millions of low-income families would be able to increase their revenue by billions at year-end.