Bitcoin Law in El Salvador and Beyond

El Salvador's Bitcoin Law has sparked a global conversation about the role of cryptocurrency in financial systems. The law, which was signed into effect in June 2021, makes Bitcoin a legal tender in the country alongside the US dollar.

The law's implementation has been a success, with many businesses in El Salvador now accepting Bitcoin as payment. This has opened up new economic opportunities for the country and its citizens.

One of the key benefits of the Bitcoin Law is its potential to increase financial inclusion. El Salvador has a large unbanked population, and the law has made it easier for people to access financial services.

El Salvador's President, Nayib Bukele, has been a strong advocate for the law, and his enthusiasm has helped to drive adoption.

El Salvador is choosing Bitcoin as a legal tender, a move that's aimed at spurring investment in the country.

President Bukele believes that using Bitcoin will help the roughly 70% of Salvadorans who don't have access to traditional financial services.

The government holds 550 Bitcoin, which is equivalent to about $26 million.

El Salvador receives billions of dollars in remittances from Salvadorans living outside the country each year, and using Bitcoin is seen as an effective way to transfer these funds.

Bukele wants El Salvador to advance towards becoming a first-world country, and he believes that legalizing Bitcoin is a step in the right direction.

Bitcoin Law is a relatively new field that has emerged in recent years. The concept of Bitcoin was first introduced in 2008 by an individual or group using the pseudonym Satoshi Nakamoto.

Bitcoin is a decentralized digital currency that allows for peer-to-peer transactions without the need for intermediaries like banks. This is made possible by a technology called blockchain, which records all transactions on a public ledger.

The first Bitcoin transaction was made in 2009, and since then, the use of Bitcoin has grown rapidly. In 2017, the price of Bitcoin surged to nearly $20,000, making it a highly valuable asset.

Central America is home to several countries with varying attitudes towards Bitcoin. El Salvador has made Bitcoin a legal tender, with the government holding 550 Bitcoin, equivalent to about $26 million. This move was made to spur investment and help Salvadorans access financial services.

El Salvador's President Bukele believes that using Bitcoin will be an effective way to transfer billions of dollars in remittances sent back to the country each year. Costa Rica, on the other hand, considers Bitcoin not to be a currency and does not back it with law.

Nicaragua has not regulated Bitcoin as of 2014, and an American banker used it to purchase real estate in the country that year. The Central Bank of Costa Rica issued a statement in 2017 emphasizing that anyone using cryptocurrency does so at their own risk.

Here's a brief overview of the legality of Bitcoin in Central American countries:

Bitcoin use in El Salvador dates back to at least 2019, with President Bukele expressing interest in the currency as early as 2017.

President Bukele and some members of the Nuevas Ideas party had been owning Bitcoin for years, according to Bloomberg News.

The coastal village of El Zonte has been experimenting with using bitcoin in the local economy since 2019. Some workers have even received their salary in bitcoin and can pay bills with it.

President Bukele announced plans to make bitcoin legal tender at a conference in Miami in June 2021. He argued that this would generate jobs and provide financial inclusion to thousands of Salvadorans outside the formal economy.

The law to make bitcoin legal tender was passed by the Legislative Assembly on June 9, 2021, with a majority vote of 62 out of 84.

The US government has been actively involved in shaping the regulatory environment for Bitcoin, with the Securities and Exchange Commission (SEC) playing a key role.

In 2019, the SEC issued a statement clarifying its stance on Bitcoin, stating that it does not consider Bitcoin to be a security.

The SEC's position has significant implications for the Bitcoin industry, as it means that companies involved in Bitcoin trading and investing may not be subject to the same level of regulation as traditional securities.

Western Europe has a varied approach to regulating Bitcoin and other cryptocurrencies. In Belgium, the Minister of Finance expressed concerns over money laundering in 2013, but indicated no immediate government intervention was necessary.

Belgium's approach is in contrast to France, where the Ministry of Finance issued regulations in 2014 regarding virtual currency professionals, exchanges, and taxation. This shows a willingness to establish clear guidelines for the industry.

Ireland stands out as its central bank does not regulate Bitcoin, and it is not considered legal tender in the European Union. This lack of regulation may appeal to those seeking a more hands-off approach.

Luxembourg has taken a more proactive stance, issuing a communication in 2014 acknowledging Bitcoin's status as a currency and later granting the first BitLicence in 2015. This indicates a desire to establish a framework for the industry.

The Netherlands also treats Bitcoin as a legal entity, but with certain caveats. "Alternative virtual currencies" like Bitcoin are not classified as money and do not fall within the scope of the Act on Financial Supervision of the Netherlands.

Opposition to Bukele's government is growing, with a recent court decision being widely seen as unconstitutional. This has led to criticism from the international community.

The U.S. Embassy in El Salvador has spoken out against the decision, calling it a move that "undermines democracy". It's a stark warning to Bukele's government that their actions are being closely watched.

Many in El Salvador are also unhappy with Bukele's leadership, with 67.9% of people disagreeing with his decision to make Bitcoin legal tender. This is according to a poll by the Universidad Centroamericana José Simeón Cañas.

The opposition to Bukele's government is not just about economics, but also about trust and accountability. His government's actions are being questioned by many, both within and outside of El Salvador.

The reception of El Salvador's Bitcoin Law was mixed, with some viewing it as good "PR value" for President Bukele, a "young president trying to capitalise on a popular image".

Many experts, however, criticized the law due to the volatility of bitcoin as an investment and the high transaction fees when used as a method of payment.

Siobhan Morden of Amherst Pierpont noted that the law could bring complications to Bukele's talks with the International Monetary Fund, and compound concerns about corruption, money laundering, and the independence of regulatory agencies.

Carlos de Sousa of Vontobel Asset Management expressed concerns that the decentralized system would lead to easier money laundering and tax avoidance.

A survey conducted by the Central American University 100 days after the Bitcoin Law came into force found that 34.8% of the population had no confidence in Bitcoin, while 35.3% had little confidence.

In a separate poll conducted by Salvadoran newspaper La Prensa Gráfica, a majority of people said they opposed the Bitcoin Law, and almost three quarters of respondents said they would not accept bitcoin as payment.

A significant number of people, 48.5%, thought that the Bitcoin Law should be abolished, according to the Central American University survey.

The implementation of the Bitcoin Law in El Salvador was a complex process. The law took effect on 7 September 2021.

The government's e-wallet, Chivo, experienced an excessive load in the early hours after the law took effect, forcing it to be taken offline. It was brought back online by mid-day after the government increased server capacity.

A crash in bitcoin price on 7 September 2021 caused a 3 million USD paper loss for the country. The government tried to rectify this by buying bitcoin, allowing the price to rise above 52,000 USD.

Over 1,000 protestors gathered outside the Supreme Court of El Salvador to protest the law due to concerns about bitcoin's volatility. Many platforms initially rejected the Chivo wallet, but it became increasingly accepted by them.

A month after the adoption of the Bitcoin Law, more El Salvadorans had Bitcoin wallets than traditional bank accounts. The government's officially-sponsored Chivo wallet had been downloaded by three million people, amounting to 46 percent of the population.

Critics of the Bitcoin law are not happy about the new rules. They even wore T-shirts to parliament to express their opposition.

Judges appointed by El Salvador's parliament, dominated by President Bukele's party, have been making some questionable decisions. They concluded that the president can run for a second term in 2024, which is barred by the country's constitution.

The parliament's decision to allow President Bukele to run for a second term has sparked controversy. It's not clear what this means for the country's future or the Bitcoin law.

Tougher rules are coming for Bitcoin and other cryptocurrencies, and it's not just the law itself that's causing concern. The fact that judges are making decisions that go against the constitution is also a worry.