For the first time, the main cryptocurrency will become a legal payment method along with the US dollar. How this will affect digital assets, and which countries may soon follow the example of El Salvador.
June 9 Salvadoran parliament passed a law that gave the Bitcoin official status of a means of payment. In the near future, the document will be signed by the President of the country Nayib Bukele. The El Salvadorian authorities will have 90 days after the law enters into force to create the appropriate infrastructure.
Acceptance of bitcoins for payment will become mandatory in the country. The cryptocurrency will be legal tender along with the US dollar, the head of El Salvador said.
After being awarded the status of a means of payment to bitcoin in El Salvador, the main cryptocurrency grew by 5%, and its capitalization increased to $ 643, according to CoinGecko. At 12:00 Moscow time, the cost of bitcoin on the Binance crypto exchange is $ 34.1 thousand.
Motives of El Salvador
El Salvador itself does not have any weight for the crypto market, the country does not even have its own national currency (calculations are carried out in dollars), noted the head of the analytical department of AMarkets Artem Deev. In his opinion, the country has decided to accept bitcoin as a means of payment, as it will help migrants transfer money to their families in El Salvador.
“The entire economy of this country is 70% dependent on such monetary subsidies from migrants who have left to work in other countries,” the analyst added.
Therefore, globally for the crypto market, the decision of the El Salvadorian authorities does not matter, Artem Deev believes. Much more important, he said, are the statements of the authorities of those countries that intend to fight against digital assets or strictly regulate them. The expert recalled the statement by former US President Donald Trump, who called bitcoin a fraud, and also called on the American authorities to “very tightly” regulate the circulation of digital assets in the country.
who is next?
Nevertheless, the adoption of bitcoin as a means of payment in El Salvador is a historic milestone, which marks the recognition of bitcoin as a tool for transferring value from not just retail or institutional users, but national regulators, said Nikita Soshnikov, director of the Alfacash cryptocurrency exchange service. In his opinion, other countries may follow the example of El Salvador, which are distinguished by high dependence on emigrant transfers, hyperinflation of the national currency, economic instability or sanctions restrictions imposed by the United States and Europe.
Other countries from the poorest category may take a similar step, but for digital assets this also has very little value, since most of the investors and traders are concentrated in the United States, developed EU countries and Asian countries, added Artem Deev.
Two days before the adoption of bitcoin as a means of payment in El Salvador , Panamanian Congressman Gabriel Silva also announced the need for such a step . He called on the Panamanian authorities to support the cryptocurrency so that the country can become a hub for technology and entrepreneurship. According to Silva, Panama’s National Assembly is already working on a bill.
A similar statement was made by the Paraguayan Congressman Carlitos Reiala. He hinted that Paraguay’s support for the cryptocurrency at the state level will soon be announced.
Implications for investors
A message appeared on Reddit that the adoption of bitcoin as a means of payment in El Salvador could negatively affect coin owners in the field of taxation, as the IRS will now be able to treat bitcoin as a foreign currency.
Roger Brown, a former senior adviser to the IRS, argues that if this happens, any gains from trading or investments will have a “normal” tax nature, writes Decrypt . Cryptocurrencies now have a lower capital gains interest rate for assets held for more than a year.
In March 2014, the IRS issued a notice stating that cryptocurrency is property and not currency for U.S. federal income tax purposes. According to Brown, this position was explained, among other things, by the fact that digital currencies are not legal tender in any country in the world, and after the decision of the El Salvadorian authorities, prerequisites arise for the IRS to designate them as a currency.
Brown himself, however, does not believe that the IRS will make any changes to tax rules for bitcoin just because the coin was recognized as legal tender in El Salvador. Despite the importance of this decision, El Salvador is not at the level of the European Union or any other major economy, Brown explained. At the same time, he did not rule out that in the future, the IRS may revise the tax rules for the main cryptocurrency, if other countries begin to use that as a means of payment.
