A government consultant said that El Salvador will not tax foreign investors on bitcoin speculation profits once it adopts bitcoin legal currency. There will be no tax on bitcoin assets, or large sums of money. Javier Argueta (Nayib Bukele’s legal advisor) stated to AFP that this was done to encourage foreign investments.
The government of El Salvador became the first to recognize bitcoin as legal tender on par with the dollar, which has dominated the country’s economy for the past two decades. Javier Argueta is the president’s legal advisor. He said that there won’t be any tax on bitcoin profits. He stated that the goal was to encourage foreign investment.
President Nayib Bukele believes that bitcoin can solve El Salvador’s most difficult economic problem: Citizens sending money home from abroad account to up to a fifth the country’s GDP. However, they are subject to high transaction fees and 70% of the population does not have a bank account. Bitcoin allows for cross-border payments at a low cost and speed without the need to use banks.
Each Salvadoran was given $30 in bitcoin (the second legal currency of the country is the US dollars), which they can use for shopping or paying taxes. It is required that companies accept bitcoin, but once they have it they can quickly convert it to dollars. Panamanian legislator suggested legislation to follow El Salvador’s lead.
“Neither the capital gain nor income will be subject to tax.” El Salvador made bitcoin legal tender along with the dollar, which has been the official currency of the country for the past 20 years. Experts and officials raised concerns about the volatility of the cryptocurrency, the potential impact it could have on price inflation in a country that is very poor and has high unemployment, as well as the lack security for users.
It is also possible that it could be used illegally, especially in laundering funds from criminal operations like drug trafficking or terrorism financing. Argueta stated that the cyber “wallet” that allows Salvadorans buy and use bitcoins from abroad and at home includes ‘necessary steps’ to ensure traceability.
The adviser said that he was implementing anti-money laundering guidelines from a number of international organizations. He stated that bitcoin transactions would be temporarily stopped if they fell in order to lessen the effects of currency fluctuations.
According to the government, the trial will allow Salvadorans access to banking services and will reduce the amount of commissions paid on remittances from the United States.
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