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El Salvador delights the crypto world

The country introduces Bitcoin as its official side currency.

•• 3 Min
El Salvador delights the crypto world

After a difficult month, Bitcoin surged over $ 37,000 when the authorities of the Central American nation of El Salvador passed a law to make Bitcoin legal tender, the first in the world. Still well off its record high of nearly $ 65,000 in April, Bitcoin received a 6% boost after El Salvador's Congress voted to make cryptocurrency acceptable legal tender. El Salvador does not have its own currency and has used the US dollar for the past two decades. After the introduction of Bitcoin, authorities said the dollar would continue to be legal tender. Among other things, according to the law passed by El Salvador, prices can now be given in Bitcoin and merchants must accept cryptocurrency as a means of payment. This also extends to tax payments. The original proposal to accept bitcoin came from the country's president, Nayib Bukele, despite concerns expressed by economists that accepting bitcoin as legal tender would create complications with the International Monetary Fund (IMF), with the IMF itself also having concerns commented on legal and economic issues. President Bukele has also directed state geothermal utility LaGeo to develop a plan to offer bitcoin mining facilities that use energy from the country's volcanoes. Elsewhere, there is no evidence that other economies, large or small, are planning similar moves to adopt Bitcoin. In fact, the opposite is more of a trend. China recently introduced new rules for cryptocurrencies. Last month, the People's Bank of China announced that financial and payment services companies are banned from setting prices or doing business in virtual currencies. The authorities argued that there is no protection for consumers should they suffer losses from crypto transactions. Some other countries, such as India and Denmark, have also banned Bitcoin, while several are planning similar bans or stricter regulation. Meanwhile, in the US, the new Treasury Department report called for stricter cryptocurrency compliance with the IRS. The Biden administration's proposal aims to strengthen tax enforcement, which requires crypto companies to record and report crypto transactions over $ 10,000, just like banks are required to do. Just a few months ago, bitcoin was unstoppable. With a year-to-date increase of more than 300%, analysts now say it could hit a whopping $ 146,000. In January, JPMorgan released a note stating that bitcoin could hit that number as it competes with gold as an "alternative" currency. Additional boost came from mainstream institutions and Tesla CEO Elon Musk, whose tweets are causing big moves in Bitcoin price. First, in January, Musk added the word "bitcoin" to his Twitter profile. Shortly thereafter, this triggered a 15% rally in the value of the currency. The tweet followed after Tesla invested $ 1.5 billion in bitcoin. Still, after another tweet from Musk describing it as overpriced, the bitcoin began to plummet. He also suspended plans to have Tesla customers pay for cars in bitcoin due to environmental concerns about the energy needed to mine it, saying it goes against the ethos of the electric car market. Earlier this week, bitcoin took another hit, falling to nearly $ 32,000 after U.S. authorities recovered most of the ransom paid to hackers targeting the Colonial Pipeline. The bitcoin bulls are still confident that bitcoin could soar to incredible new heights, but it's unlikely that El Salvador's unexpected move towards legal tender will be the driver behind it. More than anything, the move shows the extreme diversity of thinking and confusion surrounding the existential nature and future of cryptocurrency.

Crypto CurrenciesBitcoinTaxesEl Salvador

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