El Salvador is one step closer to making bitcoin legal tender..

EL Salvador’s President Nayib Bukele has sent a law to Congress proposing to make bitcoin legal tender. Currently, the country has adopted US Dollar as its currency. So if the law goes through, the country will have both currencies:

El Salvador’s President Nayib Bukele has sent a law to the country’s congress proposing to make bitcoin legal tender.

If approved by the legislative body, El Salvador would become the first nation in the world to give the cryptocurrency this status.

Bukele posted a screenshot of the “Bitcoin Law” in a tweet on Wednesday.

“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,” the law reads.

If the law is passed, prices can be shown in bitcoin, tax contributions can be paid with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax.

There is more here:

El Salvador’s top trade official said the U.S. dollar would continue to be legal tender, underscoring that bitcoin transactions would be by choice and tied to the dollar exchange rate.

This could further complicatethe Central American country’s quest to seek a more than $1 billion-program with the IMF. In May, Bukele’s party strained relations with Washington when it ousted five Supreme Court judges and the top prosecutor.

Trade and Investment Minister Miguel Kattan said bitcoin was already in limited use in El Salvador, even to buy pupusas, the national street snack.

“The ability to do operations with bitcoin should not spark concern,” Kattan told a news conference.

Still, analysts saw problems with the move to bitcoin.

“Recent tweets from President Bukele to fully embrace bitcoin as legal tender will likely further complicate and delay IMF technical discussions,” said Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpoint Securities.

“This may just reflect a long-term initiative or maybe even just a flashy PR tactic; however it shows lack of coordination with impulsive announcements that contradict a cohesive economic plan,” she said, adding Salvadorian bonds faced a Bukele risk premium of as much as 75 basis points over comparable Costa Rica bonds.

In another Indian Express article, the move is sees as authoritarian. This is as interesting as Bitcoin stood for libertarian values:

Bukele, who is described as an anti-establishment populist, is El Salvador’s first president in 30 years to win the top office without the support of one of the country’s major parties. He won the presidential election in 2019 on an agenda of fighting corruption and gang violence, and currently enjoys an approval rating of over 85%.

Before becoming president, the media-savvy leader worked at his father’s marketing company before getting elected as the mayor of San Salvador, the nation’s capital, and of a suburb.

Critics, however, have blamed Bukele for moving El Salvador in an increasingly authoritarian direction. This year, Bukele removed five judges of the Supreme Court and the attorney general– officials who had been critical of his drastic measures during the pandemic. The move was denounced as a power grab.

Bukele got along well with former US President Donald Trump, but has had a more tense relationship with the current Biden administration, which last month asked him to reverse his move to fire the top judges and the attorney general. Bukele refused.

The proposal is expected to sustain Bukele’s popularity in El Salvador, where he is seen as an innovator, as well as improve the appeal for Bitcoin, which has witnessed major fluctuations this year. It is also seen as good news for cryptocurrencies in general.

However, some crypto experts have criticised the move saying that El Salvador could have looked at crypto options that would work better as a currency than Bitcoin, whose three transactions-per-second processing rate is seen as too slow compared to other virtual tenders such as Bitcoin Cash or Monero.

Then, there are those entirely sceptical of private cryptocurrencies, who complain about the lack of a central regulating authority, potential for fraud and money laundering, high energy costs and extreme volatility.

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