Hello and welcome readers! Today I'll be talking about El Salvador putting forward a bill to make Bitcoin an official currency, alongside the USD. I discussed this with my good friend Ken here, so feel free to listen to this for our conversation, or click here to see his writing on it.
First, a couple of things before we dive in. First I'm assuming that you have an understanding of what Bitcoin is. If you don't, I would highly suggest reading into it, but it's essentially a digital currency with no physical backing, and not tied to any central government. Secondly, I am not a financial advisor, so do not take anything from this as financial advice.
I think what's most interesting about this is how it will shape commerce in El Salvador. According to the CEO of crypto wallet Zap, over 70% of the country's active citizens don't have physical bank accounts. If this is true, then access to a free and easy crypto wallet might be the next logical step for most people there. On top of this, the president has also said a couple of things that will immediately draw the eye for people heavily invested into Bitcoin. First is that there is no capital gains tax for Bitcoin transactions, since it is now a currency. The second is that people who are involved with Bitcoin can get immediate permanent residence in the country.
No capital gains tax on Bitcoin is going to be huge for the growth of Bitcoin. One of the main limiting factors about mining bitcoin for the average person, and the reason I haven't converted my mined Bitcoin into cash, is because the government taxes it at 15-20%, depending on the value. This is the same tax levied against stock trading. Without this tax, the cost for the common man will be non-existent, meaning that more people will be able to get into trading Bitcoin. On the larger scale, less taxes has always meant more business, meaning that companies interested in adding additional payment methods, but looking to avoid taxes might move to El Salvador.
In addition to that, anyone moving to El Salvador because of this can get immediate and permanent citizenship. Add that to no property tax, and there's potential for a lot of large scale miners moving to the country for their mining operations. Once there, they can live like kings for a fraction of the cost elsewhere, and then freely convert their mined coin into USD. I can see this as being popular for miners in China, who has recently moved to crack down on Bitcoin, as they can't regulate it.
These are just some of my thoughts on the situation. If you want to hear more of my thoughts, along with my friend Ken, check out our podcast short here, or our website here.
I hope you have a great day, and God Bless,
Tim B
Weekly WIN co-host
1 Corinthians 15:58