In a landmark decision expected since plans were first announced during the Bitcoin 2021 Conference in Miami on Saturday, a supermajority in El Salvador’s parliament today approved the bill that makes Bitcoin – alongside the US Dollar – legal tender in the Central-American country with immediate effect.
The adoption of the law that makes El Salvador the world’s first country to have BTC as a legal tender has the following immediate effects:
- Vendors in El Salvador must accept payments in either US$ or BTC*;
- There will be no capital gains tax applicable to the realization of BTC gains;
- Tax contributions may now be paid in BTC;
- Prices may be expressed in BTC terms.
For those unable to accept BTC payments due to lack of familiarity with technology, the government promises to provide “alternatives that allow the user to carry out transactions in bitcoin and have automatic and instant convertibility from bitcoin to USD if they wish,” the law states. “Furthermore, the State will promote the necessary training and mechanisms so that the population can access bitcoin transactions.”
Bukele has said that Salvadorians “have to take the bitcoin, but not the risk,” to which end he plans to set up a BTC-denominated trust fund equivalent in value to US$150 million through which Salvadorians could exchange their BTCs for US$, should they prefer not to hold BTC. Such conversions, according to BTC Times, would be conducted through a government-issued wallet, which Bukele plans to build together with crypto-payment app-developer Strike, the same company that assisted in the formulation of the new law.
The president also clarified that there would be a 90-day adaptation-period from the bill’s taking effect to allow for the implementation of the necessary infrastructure.
In a Twitter Spaces conversation early this morning (late last night in El Salvador), President Nayib Bukele promised to sign off on the new law no later than “first thing in the morning,” according to CoinTelegraph.
Permanent residency for US$106,000 (at today’s rates)
The promise of a jurisdiction that will not tax crypto transactions, that will bring millions of unbanked citizens into the formal economy, and that is actively promoting a private sector-driven ecosystem for crypto development has generated instant interest in relocation to the country. In the same Twitter Spaces conversation, Bukele revealed he would now turn his attention to preparing another bill, one which would enable El Salvador to grant permanent residence permits to those who would invest ฿3 in the country, some US$106,000 at current rates.
Such investments, reportedly, may take the form of real estate, business capitalization, and a number of still-undefined investment types to be defined by the government. The minimum amount, according to BTC Times, would be denominated in BTC rather than dollars. It was not immediately clear whether or how those minimum investment amounts would change with the fluctuation of BTC’s price.
Permanent residency status in El Salvador can also lead to citizenship through naturalization, on a time-frame of 1-5 years. Those eligible include:
- Persons who are nationals of Spain or Latin American countries, who have established a one-year residency;
- Foreigners from anywhere who have established a five-year residence in the territory;
- Foreigners who are married to Salvadoran spouses and have established a two-year residency; or
- Persons who have rendered exceptional service to the nation. (Available only by legislative decree).
Salvadorian citizenship provides for a great deal of mobility; according to the Henley & Partners Passport Index, holders of Salvadorian passports are welcome without a visa in 134 destinations worldwide, including the Schengen Area, the UK, Hong Kong, South Korea, Japan, Singapore, the UAE, Brazil, and a host of other desirable countries.