Last week the big day finally arrived. Bitcoin (BTC) became a in the Central American country of El Salvador legal tender putting it on par with the US dollar. The country made history by being the first country to give bitcoin a recognized position as such.
Foreign investors
One of the main goals of the new crypto law in the country is to attract foreign investors. By creating an attractive environment where cryptocurrencies are accepted, the country hopes to appeal to foreign investors.
An adviser to the president, Javier Argueta, also recently announced that such foreign investors are not required to pay taxes in the country on their crypto profits made. He states the following:
“If a person has assets in bitcoin and makes a lot of profit, then there will be no taxes. This is obviously done to encourage foreign investment. […] There will be no tax to be paid on the increase in assets or income.”
Of course, such a development is very interesting for major players within the world of crypto who do not want to pay taxes on their profits. El Salvador hopes this will become a tax haven for the crypto to become a community. Because El Salvador is the first country to go into business with bitcoin, the country has a significant ‘first-mover’ advantage.
In addition, Argueta discusses the arguments from opponents of the new law in the country. They often state that bitcoin is mainly used for criminal purposes. According to them, bitcoin as legal tender would not benefit the state of the country.
Argueta indicates that people need not worry about this. The chivo wallet, the wallet where people in El Salvador can store their crypto, has some built-in security measures. This makes transactions easy to trace and makes money laundering practically impossible.