El Salvador’s recent adoption of Bitcoin caused a lot of sparks and was hugely a topic of discussion for Bitcoin critics and advocates, and it seems El Salvador will be in the news for quite some time as the country has made yet another Bitcoin-related announcement.
The Central American country, through the President’s legal advisor – Javier Argueta announced plans to exempt foreign investors from paying taxes on Bitcoin profits. While the legal advisor says that the decision is being made to encourage local entrepreneurs and foreign investors to see the country as a viable ground to plant their businesses, the decision has started to see huge criticisms. Javier Argueta said that “If a person has assets in Bitcoin and makes high profits, there will be no tax. This obviously is to encourage foreign investment”. Critics are frowning against the decision already because they feel like this is giving prospective investors and multinational companies who are already in the country a chance to evade their social and legal responsibilities. Tax evasion and avoidance is usually one problem that every government faces when dealing with big companies, and what the El Salvador government is saying, indirectly, is that these companies do not have to pay taxes (on Bitcoin profits).
By adopting Bitcoin, individuals and businesses can now buy, sell and conduct any transaction using Bitcoin. What critics fear is that saying that foreign investors (which is a source of revenue for the country) shouldn’t pay taxes means that these companies could decide to turn all their books to reflect Bitcoin and not pay any tax at all. Before officially adopting the flagship cryptocurrency, El Salvador’s President has earlier announced in June that his administration is willing to provide permanent residency to foreigners who were willing to invest up to 3 Bitcoin in the economy of the country.
Javier Argueta also revealed that the government is liaising with foreign agencies to make sure that its financial regulations are adhered to. El Salvador’s Bitcoin adoption decision drew a lot of criticisms from citizens and even financial bodies as big as the International Monetary Fund (IMF). The IMF said the adoption of Bitcoin, which it sees as a volatile currency, was going over the edge and a decision that a country should not even think of embarking.
Following its adoption of Bitcoin, the Governor of Mexico’s central bank; Alejandro Diaz said that Bitcoin was an item of barter and not money. Bitcoin has also seen huge criticisms from big names and public figures. Former President of the United States of America; Donald Trump condemned Bitcoin, calling it a currency that was made out of thin air. Irrespective of the criticisms that it has received, and the recent price crash which sent Bitcoin crashing from a newly reclaimed spot of $50,000, the flagship cryptocurrency continues to sail and remains the world’s biggest cryptocurrency.
As of the time of this writing, Bitcoin was up more than 3 percent and was trading at $46,005.10.
The adoption of Bitcoin in El Salvador is also pushing other countries to at least make it legal. For instance, Bitcoin is to become legal in Ukraine and several other Central American countries are already drafting laws in regards to Bitcoin.