Bitcoin Law
| Bitcoin Law | |
|---|---|
| File:Coat of arms of El Salvador.svg | |
| Legislative Assembly of El Salvador | |
| Territorial extent | El Salvador |
| Date enacted | 8 June 2021[1][2][3] |
| Date effective | 7 September 2021[4][5] |
| Status: In force | |
The Bitcoin Law[6] (Spanish: Ley Bitcoin)[7] was passed by the Legislative Assembly of El Salvador on 8 June 2021, giving the cryptocurrency bitcoin the status of legal tender within El Salvador after 7 September 2021. It was proposed by President Nayib Bukele. The text of the law states that "the purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out".[6]
History
Bitcoin use as a currency in El Salvador had been experimented with since at least 2019, and current President Bukele expressed interest in Bitcoin while he was mayor of San Salvador in 2017. Bloomberg News reported in June 2021 that Bukele and some members of the Nuevas Ideas party had owned Bitcoin for years.[8]
The coastal village of El Zonte has had an active experiment underway to use Bitcoin in the local economy since 2019, where some workers have received their salary and can pay bills in Bitcoin, and others use it to buy food and other goods from local shops.[8][9]
At a conference for bitcoin in Miami in June 2021,[10] President Nayib Bukele of El Salvador announced that he would be looking to promulgate a law allowing bitcoin as legal tender, saying that it would "generate jobs and help provide financial inclusion to thousands outside the formal economy".[11] According to Bukele, the law is aimed at the approximately 70% of Salvadorans without bank accounts, and will increase inclusion for them.[6] Bukele argued that the bill would increase investment as well as reducing fees from current services for remittances.[12] In pushing the bill, Bukele cooperated with Strike, a financial service firm[11] which uses the Lightning Network for settlement,[13] and Jack Mallers, its CEO.[8][12]
The law was passed by the Legislative Assembly of El Salvador on 9 June 2021, with a majority vote of 62 out of 84. Bitcoin became legal tender on 7 September 2021,[5] 90 days after the publication of the law in the official gazette,[14][15] which makes El Salvador the first country to have bitcoin as legal tender.[5][16]
Reception
The law was commented on as something of good "PR value" for Bukele, as a "young president trying to capitalise on a popular image". It was also criticized due to the volatility of bitcoin when used as an investment,[11][12] and the high transaction fees when used as a method of payment.[17]
Siobhan Morden of Amherst Pierpont commented that the law could bring complications to Bukele's talks with the International Monetary Fund.[18] She noted that the law would "likely only compound concerns about corruption, money laundering and the independence of regulatory agencies."[15] Carlos de Sousa of Vontobel Asset Management expressed concerns that the decentralized system would lead to easier money laundering and tax avoidance.[18] According to Ernst & Young, the adoption of bitcoin as legal tender by El Salvador could have consequences for US taxpayers holding the cryptocurrency, because "If more countries adopt bitcoin as legal tender, the US federal income tax treatment of bitcoin could change. Instead of being treated as an investment that is a capital asset, bitcoin could be treated as generating ordinary income under Section 988."[19]
Implementation
Lua error in package.lua at line 80: module 'strict' not found. The new law took effect on 7 September 2021.[5]
In the early hours after the law took effect and the official launch of new technologies to deal with a major change to the national currency infrastructure, the government had to take its bitcoin e-wallet offline due to excessive load. The Bukele government increased server capacity and brought the e-wallet back online by mid-day.[5]
See also
- Legality of bitcoin by country or territory
- Petro, state-issued cryptocurrency of Venezuela
- Other countries considering making Bitcoin legal tender:[20] Malta, and Panama
References
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- Press release, on the official website of the Legislative Assembly of El Salvador
- Opinion of the Financial Committee of the Legislative Assembly of El Salvador
- Full text of the law in English
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- ↑ Diario Oficial, numero 110, tomo n° 431, 9 de junio de 2021 Archived 2021-06-12 at the Wayback Machine, Official Journal of El Salvador, National Press of El Salvador
- ↑ 8.0 8.1 8.2 Lua error in package.lua at line 80: module 'strict' not found.
- ↑ https://www.latimes.com/world-nation/story/2021-06-22/in-el-salvadors-bitcoin-beach Archived 2021-09-03 at the Wayback Machine, Los Angeles Times, 22 June 2021, accessed 23 June 2021.
- ↑ Lua error in package.lua at line 80: module 'strict' not found.
- ↑ 11.0 11.1 11.2 Lua error in package.lua at line 80: module 'strict' not found.
- ↑ 12.0 12.1 12.2 Lua error in package.lua at line 80: module 'strict' not found.
- ↑ The Bitcoin Law: Counterfeit Free Choice in Currency Archived 2021-07-06 at the Wayback Machine, George Selgin, 17 June 2021, accessed 18 June 2021.
- ↑ Lua error in package.lua at line 80: module 'strict' not found.
- ↑ 15.0 15.1 Lua error in package.lua at line 80: module 'strict' not found.
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- ↑ 18.0 18.1 Lua error in package.lua at line 80: module 'strict' not found.
- ↑ US taxpayers should be mindful of certain tax provisions that may need to be considered with respect to bitcoin following approval of recent legislation in El Salvador Archived 2021-06-18 at the Wayback Machine, 14 Jun 2021, Ernst & Young
- ↑ More countries line up to make Bitcoin legal tender - which one will be next? Archived 2021-08-31 at the Wayback Machine, Darren Parkin, CityAM, 10 June 2021, accessed 18 June 2021.
