In El Salvador, the digital currency Bitcoin will be legal tender from Tuesday. The Central American state is the first country in the world to take this step. A corresponding law was passed three months ago and will now come into force on Tuesday.
It stipulates that every merchant who is technically capable of doing so must accept Bitcoin as a means of payment. Taxes can also be paid in the cryptocurrency.
No capital gains tax should be levied on the exchange of Bitcoin. The exchange rate to the US dollar, which is used in El Salvador as an official means of payment instead of a local currency, is to be decided freely by the market. According to President Nayib Bukele, anyone who downloads the “Chivo” digital wallet receives a starting credit worth 30 US dollars (around 25 euros). There should also be 200 “Chivo” ATMs.
Bitcoin is the most popular digital currency. It is not controlled by a central bank, but created by a decentralized and extremely energy-intensive computer process. The cryptocurrency is considered an object of speculation and is subject to violent price fluctuations.
The US dollar has been used as a means of payment in El Salvador since 2001. This makes the country dependent on the monetary policy of the US Federal Reserve. For the nation’s economic growth, it is necessary to allow the circulation of a digital currency, the value of which depends solely on market economy criteria, says the text of the law. In addition, around 70 percent of the approximately six million residents of El Salvador have no access to traditional financial services. Many rely on their loved ones to send money in the United States.
According to a nationwide survey by the Universidad Centroamericana (UCA) with almost 1,300 participants in August, around 70 percent of Salvadorans reject the Bitcoin law. About the same number therefore had imprecise ideas about Bitcoin: only 4.8 percent of those surveyed correctly defined it as a cryptocurrency.
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