El Salvador: What could be the real incentives behind the bitcoin law?

Photo: Fsociety /NayibBukele2/CC BY-SA 4.0

 

 

The approval of the bitcoin law it has been a real surprise for those interested in this industry. Considering such a volatile currency as a valid means of payment throughout the country and forcing all businesses to accept it (art. 7) is undoubtedly a great economic and social experiment that everyone is eager to see.

Many ordinary citizens are still skeptical of the measure, basically because it involves electronic means of payment, unfamiliar so far. However, skepticism should actually start from the fact that it is an unstable currency, which although it may have moments of wide rallies, it also presents sharp and prolonged declines (like the one in recent weeks).

Usually this digital currency is used as a type of investment fund, but not as a means of payment, precisely because its value is very changeable. Of course, seeing this dynamic will be very interesting.

President Nayib Bukele was the precursor of this rule, he pointed out that it would reduce the cost of remittances from compatriots abroad to El Salvador, in the same way, he pointed out that it is a measure that will promote the financial inclusion of many citizens who do not have bank accounts. . In addition to this, it is possible that this “favorable crypto” climate will attract many bitcoin companies to the country, thus encouraging development and investment.

Sounds good doesn't it? What could go wrong? Well actually a lot, the financial stability of the country, for example.

But What are the real incentives behind this law?

Apparently everything has to do with tax collection and the country's famous remittances. To date, they are known to be large, but the government has no control over them. What if now remittances arrive in bitcoin? And that of course people would want to convert that money into dollars and the only viable way (so far) is the Chivo government Wallet. That is the way for the government to know the money in the form of bitcoin that enters the country, and that they will then convert into dollars to give it to the citizen. In this way, the government enters the equation and the chain of the country's famous remittances.

 According to VisualPolitik, this way of integrating into the chain of remittances would allow them to: “place the commission, the conversion rate that suits them"In this way, they could control the amount of dollars that they will give them by the number of bitcoins that have been deposited to them. But this doesn't necessarily have to be bad, right? or if? Actually, we could give the benefit of the doubt, after all, the world is full of good intentions.

A negative scenario? That citizens can only use the Chivo app as an exclusive conversion alternative. it could happen? According to article 9 of the ley, we must wait for the regulation: "the limitations and operation of automatic conversion alternatives and snapshot of bitcoin to dollar provided by the State will be specified in the Regulation that to the effect it is emitted"

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Marilú Lazo
Lawyer from the Pontificia Universidad Católica del Perú (PUCP). Director of The Crypto Legal Blog, she has experience in corporate advice, consumer protection, as well as in matters of personal data protection and new technologies.

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