The cryptocurrency area and the wider economic community continue to celebrate El Salvador’s historic transition to legal tender for bitcoin. The country of Central America was the first in the world to do so, and the move also prompted a handful of other Central and South American countries to begin taking steps toward the same opportunity.
Unsurprisingly, the move made a splash in the cryptocurrency community, and bitcoin (BTC) supporters in particular highlighted the importance of legislative changes to stimulate cryptocurrency adoption. There were some critics who highlighted the law’s potentially coercive implications, which added intrigue to the situation, but overall the reaction was positive.
Things took off quickly in El Salvador after Prime Minister Nep Bukele announced – what happened during the Bitcoin 2021 conference in Miami – that the country’s conference would vote on new legislation. Within days, Bukele’s plans to submit a legal tender for bitcoin became a reality when El Salvador’s legislature voted in favor of the new law on June 9.
The head of state took a step forward when he instructed the state-owned electricity producer LaGeo to start exploring the possibility of mining bitcoin using the country’s rich geothermal energy. At least a day later, a new geothermal well was drilled, which Bukele said will operate a bitcoin mine in the near future.
The move was even immortalized on the Bitcoin blockchain by the miner Poolin, which included a headline from a Salvadoran newspaper that read “asamblea aprueba la ley bitcoin”, which translates as “Periodization approves bitcoin law” to block 686938 that was previously extracted this week. This reminds us of the pseudonym of Bitcoin founder Satoshi Nakamoto, including the Times headline that read “The Times 03 / Jan / 2009 Chancellor on Brink of Second Bank Bailout” in the Bitcoin origin block over a decade ago.
Bukele also promised to help Bitcoin users migrate to El Salvador while promoting the benefits of BTC, which is no longer subject to capital gains tax. With issues moving at an enormous pace in El Salvador, it is worth looking at the broader response from the crypto community and the implications of new legislation.
An overview of the bitcoin law in El Salvador
El Salvador’s Congress voted to pass President Bukele’s ‘Bitcoin Law,’ which recognizes bitcoin as a legal tender alongside the US dollar, with 62 votes out of 84 under the new legislation.
The law will allow residents to pay for goods and services in bitcoins, and Bukele also stated that the government of El Salvador will ensure that bitcoins are converted into dollars during any transaction.
This was made possible by a $ 150 million loan created by the Pandisal Development Bank in El Salvador. Basically, the government will buy BTC from the locals if they want to receive dollars instead of BTC.
Sticking point is section 7 of the law, which requires sellers or companies to accept bitcoins as payment from customers, as they are now legal tender. Economist and historian George Seljen expressed serious concerns about Articles 7 and 13 in a series of tweets on Twitter, noting that they are coercive, as they will force all Salvadoran merchants and companies to accept Bitcoin as a method of payment.
Article 7 states: “Every financial agent must accept bitcoins as payment if they are offered to him by anyone who buys a good or service.” Article 13 states: “All monetary liabilities denominated in US dollars that existed before the date of entry into force of this Act may be settled in bitcoins.”
A prominent economist said the measure was a “victory for Bitcoin”, but doubted it was a “victory for freedom” as the articles would force Salvadoran companies and suppliers to accept BTC whether they like it or not. Celgene argued that Articles 7 and 13, which are “referred to as” legal tender provisions “,” significantly undermine the free choice of currency, not marketing. ”
“This is a (relatively) rare example of something being introduced as mandatory trading, not only to settle outstanding debts, but also on stock exchanges. This is in fact even more contrary to the principle of choice in the coin. Instead of just letting sellers accept BTC for payment, the article obliges them to do so, even if they prefer to receive payment in USD (or whatever). Very few countries have such strict legal tender laws that used to be a last resort for desperate governments. “