This 9 June 2021 might be historical for the cryptocurrencyA digital currency running on a blockchain and built with cryptography. Contrary to central-bank issued currency, cryptocurrency issuance rules are... world. For the first time in twelve years of existence, a recognized nation adopted BitcoinBitcoin is the first decentralized digital currency. It was created in 2009, by an anonymous founder or group of founders... More (BTCAn abbreviation for Bitcoin.) as an official legal tender. El Salvador, a small country in Central America, just approved their new “Bitcoin Law” for immediate application.
The law was the initiative of the current president, Nayib Bukele, who first announced it in the previous days. By now, the Legislative Assembly has officially approved the decree. Therefore, Bitcoin is already “unrestricted legal tender with liberating power, unlimited in any transactionA cryptocurrency transaction is an entry on the blockchain ledger, noting sender, receiver and number of coins transacted., and to any title that public or private natural or legal persons require carrying out” in El Salvador.
According to the law, the exchange rate between BTC and USD (the current legal tender there) will be freely set by the market. Besides, everyone with the right infrastructure is obliged to take BTC as payment. The prices can be set in BTC, there are no capital gain taxes for exchange bitcoins, and all the other taxes can be paid in this currency.
However, the USD will still serve as a reference currency for accounting purposes. Likewise, the Development Bank of El Salvador (BANDESAL) will create a trust fund of $150 million that will be used to assume the risk of operations with Bitcoin. As indicated by the president:
“For example, if a lady who sells food in the street market doesn’t want to keep the bitcoins she received as a result of her sales, then the fund will buy her BTC, absorbing the risk. Therefore, the objective of the trust fund will be to protect people who don’t want to take the risk, even if by law they’re obliged to receive payments in this cryptocurrency.”
Bitcoin mining in El Salvador
Something very discussed lately has been the environmental issues surrounding crypto-mining. Last month, Tesla stopped accepting Bitcoin payments. They alleged that the mining isn’t eco-friendly, since it consumes as much energy as some countries. Not long after, Elon Musk himself formed an alliance to mine cryptocurrencies with renewable energies.
President Bukele is following that example with Bitcoin in his country. Currently, El Salvador is generating more renewable energies than any other type. According to the National Energy Commission, around 86% of the total energy production comes from renewables, including mainly hydroelectric and geothermal.
The latter is very important, indeed, since there are at least 20 potentially active volcanoes in the country, and around 170 in total, nothing less. That’s why Bukele ordered to LaGeo, the state energy company, to create new facilities specially bound to mine Bitcoin. They’re already digging a new well to provide around 95MW of clean geothermal energy.
Since China could be on the edge to ban cryptocurrency mining, El Salvador could become what its name means (“saviour”) for a lot of Bitcoin miners worldwide. Today, this territory has probably become the friendliest place on Earth to operate with BTC: legal tender, no taxes, open ways for payments, exchanges, and mining. Nothing grants this will go perfectly, but it’s a great start for Bitcoin as the currency of the future.
Featured Image by Gerson Rodriguez / Pixabay
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