El Salvador introduces bitcoin as national currency

This month has seen El Salvador become the first nation to make bitcoin legal tender. Bitcoin has joined the US dollar as the Central American country’s national currency.

While some have cast doubts on the move, El Salvador has started to draft proposals to encourage confidence in its approach and attract investors. It has been reported that the country will exempt foreigners from paying taxes on their profits from cryptocurrency, as part of a drive to boost investment from abroad.

A legal adviser to El Salvador’s President Nayib Bukele has said there will be no taxes to pay on either the capital increase or the income. With the country having formally adopted bitcoin as currency from September 7 in a bid to tackle its problems with hyper-inflation, the no-tax proposal is seen as one way of generating support for its bold move. The El Salvador government also hopes that its adoption of bitcoin will remove the millions of dollars in commissions that have been paid by those looking to send money back to the country; usually from the United States.

So far, the arrival of bitcoin has encountered problems. Technical difficulties with El Salvador’s Chivo national crypto wallet led to bitcoin’s price falling by 17% on the country’s launch day. There have also been a number of protests against the move, with some sceptical about a country with a struggling economy relying on bitcoin when cryptocurrency can be subject to price swings.

But while El Salvador’s adoption of bitcoin has been far from smooth, there are other countries watching how it develops, as they are considering taking similar action.