El Salvador became the first country in the world to recognize bitcoin cryptocurrency as legal tender, according to President Nayib Bukele in a tweet on Wednesday. Citizens will be able to pay taxes in bitcoin and, perhaps most importantly for bitcoin enthusiasts, bitcoin will not be subject to capital gains tax in El Salvador.
“The #BitcoinLaw was approved by a qualified majority in Salvadoran Congress,” President Bukele, 39, tweeted. Wednesday. “62 votes out of 84! History! #btc “
The price of bitcoin, abbreviated as BTC, has increased early Tuesday after the announcement of El Salvador, up 4.3% in the past 24 hours.
The so-called Bitcoin Law recognizes that around 70% of Salvadorans do not have access to traditional financial services and offers bitcoin as a possible alternative. The law suggests bitcoin is awesome as a digital currency because it, “Exclusively meets free market criteria, in order to increase national wealth for the benefit of the greatest number of inhabitants.
Retailers in El Salvador can now list bitcoin prices, although the law states that the US dollar should be used as the base currency for accounting purposes. This is almost a given since the price of bitcoin fluctuates wildly every day – or at any time for that matter.
For example, bitcoin plunged to $ 31,453 on Tuesday and is currently trading at $ 34.33.5 according to CoinDesk. With this kind of volatility, many retailers who accept bitcoin display their prices in US dollars. Tesla did precisely that during the brief period it was accepting bitcoin for its cars. The electric car maker dropped the program after Elon Musk expressed concerns about the environmental impact of bitcoin, which isn’t exactly new information.
To be clear, there is no evidence that bitcoin is helping the poor this new law in El Salvador claims it is trying to help, but it is a great move for all the rich in the Latin American nation who want hide crypto profits under the guise of economic “freedom”.
Will people all over the world try to transfer their bitcoin profits to El Salvador in order to get some kind of tax benefit? It is quite possible, but would still be a useless exercise for the average American. The U.S. tax code applies to all Americans no matter where they reside, so any U.S. citizen would likely have to set up some sort of complex shell corporation in El Salvador in order to avoid paying capital gains taxes on the bitcoin. That is, you cannot physically take your bitcoin wallet to El Salvador and think that you are just going to avoid paying the capital gains tax on crypto income, at least not without first disclosing your American citizenship, and this comes with a lot of its own tax penalties.
President Bukele recently changed his Twitter avatar to include laser eyes, a modification that was once associated with white supremacists but has recently been adopted by bitcoin enthusiasts. Bitcoin believers have been elated since Bukele announced plans to adopt bitcoin as legal tender earlier this week.
Bitcoin has plunged in recent months, responding to the whims of the world’s second richest person, Elon Musk. SpaceX founder changed his Twitter bio to read “bitcoin” in March and said he was a great believer. Musk’s company Tesla even announced in an SEC filing that it had bought a huge amount of bitcoin. before Musk shoots a 180 that can only be interpreted as a very blatant attempt to move the crypto market up and down whenever it wants. In May, Musk explained that he no longer wanted to accept bitcoin and the price of bitcoin. tanked.
Yes, bitcoin is officially not beholden to any government in the world, but for a supposedly “decentralized” store of value, it depends a lot on how Elon Musk feels on any given day.
Anyone can guess how El Salvador will fare with bitcoin being recognized as the official currency, but we can safely bet on one thing: the rich will get richer and the poor will almost certainly suffer.