El Salvador is set to become the first country in the world to adopt a cryptocurrency as legal tender. According to the bill just approved by its parliament, Bitcoin will join the US Dollar as the country’s official currencies.
According to President Nayib Bukele, the move will make it easier for Salvadorans living abroad to send payments home. The country benefits from annual remittances totalling around US$ 4 billion, making up around 20% of the country’s GDP.
President Bukele also seems to be hoping the country will benefit from some of the money flowing through Bitcoin transactions. On a tweet announcing the proposals, he stated that El Salvador’s GDP would increase by 25% if only 1% of Bitcoin’s market capitalisation of US$ 680 billion were to be invested in the country.
“Cryptocurrencies can be a game changer for remittances, responsible for the movement of some US$500 billion every year. By benefiting from cheaper and simpler transactions, cryptos can play a big role in transforming the remittance market that is so important for millions of people and entire countries worldwide”, commented Dynasty Global Investments AG’s co-founder and CEO, Fábio Asdurian.
By making the crypto legal tender, buying and selling it will no longer be classed as an investment, thus no longer attracting capital gains tax. This, the Salvadoran authorities hope, will make the country more attractive to those interested in investing in the cryptocurrency.