Status: 06.09.2021 10:26 a.m.
El Salvador is the first country to allow Bitcoin as legal tender. Purchases and taxes can be paid in digital currency from Tuesday. The government lures with a starting credit.
The Central American state of El Salvador is the first country in the world in which the digital currency Bitcoin becomes legal tender. 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.
According to the wording of the law, 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. The law was passed on the proposal of President Nayib Bukele.
The introduction of the digital currency is not well received by the citizens. There were even street protests. According to a nationwide survey by the Universidad Centroamericana (UCA) in August, in which almost 1,300 participants were interviewed, almost 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.
To lure citizens, the state grants them a starting credit worth 30 US dollars if they download the “Chivo” digital wallet. That corresponds to around 25 euros. There are also said to be 200 “Chivo” ATMs.
No capital gains tax should be levied on the exchange of Bitcoin. The market decides on the exchange rate to the US dollar, which is used in El Salvador as an official means of payment instead of a local currency.
Highly speculative means of payment
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. 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.
Around two million El Salvadorians work abroad. According to the BBC, your transfers make up around 20 percent of the gross domestic product.
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 price for a Bitcoin is currently just under $ 52,000. In mid-July, the price was around $ 30,000. Therefore, critics consider them unsuitable as a means of payment.
Bukele before second term
Neil Wilson, chief market analyst at Markets.com, sees the move as an attempt by an autocratic regime to attract attention. In his opinion, the poorest in the country are the last to benefit from the introduction of Bitcoin.
In addition to insubordinate proximity to the military, President Bukele is accused of systematic disregard for the separation of powers and influencing the judiciary. Among other things, he had soldiers deployed in parliament in February 2020.
As it currently stands, Bukele is facing another term of office. The judiciary in El Salvador has now paved the way for this despite criticism from human rights activists. The electoral authority of the Central American country announced over the weekend that it would join a controversial decision by the Supreme Court. He had ruled that the previous mandatory break of ten years between two terms as head of state was no longer necessary with immediate effect.