The time has come: In El Salvador, Bitcoin will count as legal tender as of September 7.
El Salvador is the first country in the world to make Bitcoin legal tender. The corresponding bill, which the parliament already passed on June 9, comes into force tomorrow, September 7. The content of the bill is, among other things, the obligation to accept Bitcoin payments. If technical circumstances prevent BTC custody, the government will offer “instant conversion to US dollars”. Since very few companies are likely to have sufficient technical infrastructure to begin with, the Salvadoran state could soon be sitting on a veritable digital gold treasure.
To ensure that as many traders as possible adopt BTC as part of their daily business in the medium term, the government of the Central American country is also committed to providing active support. For example, the parliament has agreed to set up a 150 million US dollar trust fund to provide money for Bitcoin-related infrastructure projects. The so-called Chivo Wallet is also expected to jumpstart the historic decision. All residents:inside El Salvador who choose to download will receive $30 in BTC as a starting credit – roughly three times an average day’s income.
However, market observers:inside are paying particular attention to Article 5 of the “Bitcoin Law”. It states:
“Exchange transactions with Bitcoin are not subject to capital gains tax, just as with all other legal tender”. Without this passage, the law would be a fiscal nightmare, since between each purchase and sale of Bitcoin, the difference in exchange rate could lead to any taxable transactions.
That the Salvadoran state is making BTC its currency of choice is also evidenced by Article 4, which stipulates that taxes can also be paid in BTC. However, the US dollar remains legal tender alongside Bitcoin – and is likely to account for the majority of the trading volume for the time being. According to a nationwide survey, 70 percent of the country’s citizens are critical of the Bitcoin law and the majority have no basic knowledge of BTC.
Expressions of solidarity on Reddit
It’s almost idle to say, but on the internet, people are celebrating the Salvadoran government for the Bitcoin law like a holiday and announcing support. On September 4, for example, a post went viral urging the more than three million-member community to buy $30 in BTC at 3 p.m. CST (11 p.m. German time) on the day the law was introduced.
Assuming every member of r/Bitcoin follows the call, that would add up to a trading volume of just under $100 million. With a daily global trading volume in the double-digit billions, this would only be a drop in the bucket.
The view of large companies is more decisive. Den El Salvador, corporations such as VW, McDonalds, Sheraton and Coca-Cola are active – all of these companies will have to consider how to incorporate Bitcoin acceptance into their business operations in the near future. Whether and how the new currency will be accepted remains to be seen.