El Salvador to Become First Nation With Bitcoin as Legal Tender

Bitcoin 2021, Miami — El Salvador may soon become the world’s first nation to have bitcoin as legal tender. 

“Next week I will send to Congress a bill that will make bitcoin a legal tender in El Salvador,” El Salvador President Nayib Bukele said via video toward the end of the final day at the Bitcoin 2021 conference in Miami. “In the short term, this will generate jobs and help provide financial inclusion to thousands.” 

El Salvador President Nayib Bukele via video at Bitcoin 2021.

Bukele pointed to current global trends in fiscal policy, claiming that crypto allows protection from dangerous central bank actions. 

“Central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador,” he said. “In order to mitigate the negative impact from central banks, it becomes necessary to authorize the circulation of a digital currency with the supply that cannot be controlled by any central bank.” 

Jack Mallers, CEO of bitcoin investment and payments company Zap, introduced the news.

“They asked me to help write a plan and that they view bitcoin as a world-class currency,” said Mallers. “They said we needed to put together a bitcoin plan to help these people.” 

Mallers spoke of his time in El Salvador and the poverty that he saw. Bitcoin is a solution to many of their problems, he said. 

If the legislation passes in El Salvador making bitcoin legal tender, it could be the first step toward a truly global currency accepted anywhere in the world, according to Roger M. Brown, global head of tax solutions at Lukka, who talked to Blockworks via email.

“Sure, some countries could seek to wrestle back control, like Turkey’s ban on bitcoin transactions because many residents preferred it to their local currency.  However, those actions may not prevail given bitcoin’s decentralized nature,” said Brown.

“Tax, accounting, and other rules will also have to acknowledge that bitcoin is or can be currency in some instances, and therefore the tax and accounting rules would have to adjust — rather than just calling it a capital asset or a ‘long lived intangible,'” he added.

“In effect, ‘big bang’ is the right phrase for this development from tax, accounting and regulatory perspectives.
Tax and accounting rules will have to change their treatment, as well as other rules which differ in their application as to whether a currency is involved.”

This story was updated at 5:47 p.m. EDT.

Read more of our coverage from Bitcoin 2021 here.