The Central American country of El Salvador became the first country in the world to designate Bitcoin as legal tender.
On June 9, El Salvador’s President Nayib Bukele tweeted that the Bitcoin bill he submitted passed the Congress by an overwhelming advantage, with 84 votes. 62 votes in favor. In the morning, Nayib Bukele claimed to send the Bitcoin bill to Congress for a vote.
El Salvador’s President Nayib Bukele tweeted that the proposal to set Bitcoin as legal tender was passed by Congress
The bill read: “The purpose of this law It is to establish Bitcoin as an unrestricted legal currency with free rights, which is not restricted in any transaction, and can be enforced by any public or private natural or legal person.” This legislation will take effect in 90 days. As a result, commodity prices can be displayed in Bitcoin, taxes can be paid in Bitcoin, and Bitcoin exchanges will not have to pay capital gains taxes.
In this regard, Wang Yongli, former vice president of Bank of China and chief economist of Shenzhen Neptunus Group, pointed out in an interview with reporters that some countries that lack sovereign currencies lack currency The most basic cognition is that using fully decentralized digital encrypted assets such as Bitcoin as legal tender will inevitably disrupt economic and social operations due to its own price fluctuations. The state has no means of control and can only find its own way.
According to the Wall Street Journal, El Salvador is one of the poorest countries in Latin America. It has been working hard to manage its own finances for many years. Since 2001, it has been using the US dollar as the official currency.
Sun Yang, a researcher at the Suning Institute of Finance, told the news that El Salvador’s financial services framework is very weak, and large multinational financial institutions feel that the country is relatively small and has no incentive to set up here. Branches. Therefore, the country hopes to improve the level of financial services through the power of Bitcoin. Moreover, Bitcoin does not require special central banks and financial institutions, and the service is relatively simple.
According to BBC reports, El Salvador’s economy relies heavily on remittances, that is, money sent home from abroad. TheseMoney accounts for about 20% of the country’s gross domestic product (GDP). More than 2 million Salvadorans live abroad, but they continue to maintain close contact with their place of birth, repatriating more than 4 billion U.S. dollars (2.9 billion euros per year). The report speculated that the digital currency may have allowed family members in the country to avoid the high cost of sending money home each month.
According to the Bitcoin law, about 70% of Salvadorans do not have access to traditional financial services. Cryptocurrency is seen as a way to increase financial inclusion.
Bukele said: “This will improve the lives and future of millions of people.”
Digital currency expert Rohan Grey told the BBC that Bukele is “a young president trying to use the public image.” He said: “Even if you haven’t figured out all the details, announcing such a thing has great public relations value.”.
CNBC reported that it’s still unclear how El Salvador will eventually launch Bitcoin as legal tender, but before Bukele submitted the law, it was announced last week that El Salvador had cooperated with the digital wallet company. Strike has reached a partnership to use Bitcoin technology to build the country’s modern financial infrastructure.
“Expectations are too high”?
But Sun Yang also mentioned that after Bitcoin becomes legal tender, it may challenge the financial supervision of El Salvador. Bitcoin is inherently distributed Anonymous. I don’t want anyone to supervise it. El Salvador definitely hopes that there will be control and supervision. There will be some contradictions in the future.
A financial expert who did not want to be named told a reporter: “Bitcoin cannot be an effective payment tool. I believe El Salvador will realize this soon. “He believes that Bitcoin can never achieve value stability and can only be a speculative alternative asset.
Associate Professor Wang Zhicheng of the Guanghua School of Management of Peking University also told the news that the current stability of Bitcoin is too poor, the atmosphere of hype is too strong, and the risk of unexpected impact on the market It is not easy to control, and its function as currency is still inadequate. It is more suitable as a virtual commodity role. He believes that El Salvador chooses Bitcoin as its legal currency, or it has the purpose of promoting itself and gaining investment attention from the international crypto asset group.
“Some small countries that do not have their own currencies are eager to get rid of the control of major currencies (such as the U.S. dollar). They had illusions about cryptocurrencies in the early years. Venezuela also claimed to use Ethereum encryption technology to launch Over the’petroleum’. “Wang Yongli said.
He believes that El Salvador’s claim to use Bitcoin as legal tender is very exciting to the currency circle, but it may be too high.
Grey also warned that, more generally, the adoption of cryptocurrency as legal tender in a country would give “a lot of control over an unstable network that is not responsible. Participants also did not provide a record of the price stability and liquidity that currency should provide.”