El Salvador’s president Nayib Bukele recently made history in adopting Bitcoin as a national currency. Bukele took a major step towards legalizing Bitcoin in El Salvador with the new law governing its use effective September 7, 2021.
Previously addressing the nation, president Bukele announced the government’s intention to give $30 to every citizen who downloads the government’s crypto app. The move is considered both a publicity ploy by some and cheered by others active in the crypto community.
The Bitcoin law will come into effect on September 7, 2021. With the implementation of Bitcoin law in the El Salvador state, Bitcoin along with the U.S. dollar will be considered legal tender. This historic law will make El Salvador the world’s first country to legalize Bitcoin as a legal tender potentially propelling its acceptance worldwide.
BITCOIN FUTURE IN EL SALVADOR
The president explained to his citizens what future transactions will look like after the Bitcoin law is adopted.
He said, “The use of bitcoin will be optional, nobody will receive bitcoin if they don’t want it.” He then went on to say, “If someone receives a payment in bitcoin they can choose to automatically receive it in dollars.”
El Salvador’s president made it very clear that the pensions and salaries will continue to be denominated in U.S. dollars. He also added that any payments received in Bitcoin will be immediately be converted to U.S. dollars. Many critics of the law state that Bitcoin is not yet an efficient means of facilitating prompt payment. While others pile on pointing to both China and commercial concerns like Tesla backing away from accepting Bitcoin as a payment currency.
The Bitcoin law was passed by a supermajority. It bagged 62 votes out of 84, with only modest opposition. The government claims potential economic growth through the implementation of the Bitcoin law. Although, it is widely reported that many small businesses are not yet equipped to handle the acceptance of Bitcoin nor deal with the conversion of the cryptocurrency to fiat.
One of the reasons behind the law is that 70% of El Salvador citizens are unable to access traditional financial services making it difficult to access the remittances sent by workers. Remittances cover approximately 20% of El Salvador’s GDP, which is the highest in the world.
If the government’s claims are believed then the Bitcoin law will make it easier for people to send and receive remittances. Others disagree implying the poorest Salvadorans do not understand crypto and will financially be left behind.
The International Monetary Fund (IMF) says that this new law raises various legal, financial, and macroeconomic issues. These issues need careful analysis if the Bitcoin law is to be implemented successfully.
LEGALITY OF BITCOIN
In the emerging new cryptocurrency world, the legal status of Bitcoin still stands unclear. As of now, Bitcoin use is legal in the U.S., UK, and many developed countries. However, China as a world power is cracking down on all cryptocurrencies, and other countries have varied norms regarding the legal status of Bitcoin.
Bitcoin as a peer-to-peer digital currency has gradually increased in acceptance worldwide, but not every state, region, or country treats it the same from a legal and regulatory perspective. Bitcoin is not endorsed or regulated by any central authority and as such makes El Salvador’s move to accept Bitcoin as legal tender unique.
As to the U.S., if money services companies, such as cryptocurrency exchanges, money transmitters, and anonymizing services (sometimes known as “mixers” or “tumblers”), conduct a significant amount of business in the United States, they must register.
• Register as a money services business with FinCEN in the United States.
• Create and implement an anti-money laundering (AML) strategy, and
• Keep proper records and submit reports to FinCEN, such as Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) (CTRs)
The Bitcoin legality scenario is different around the world. So, it becomes important to check Bitcoin’s legal status and rules as country specific.
The world will be watching closely as El Salvador becomes the first country to accept Bitcoin as legal tender.