El Salvador becomes the first country to adopt Bitcoin as its official currency.
This is happening!
Today we are going to talk a little about the implications of this news.
Without a shadow of a doubt, it was a historic day that needs to be celebrated.
It is surprising because everything is happening so fast and it is difficult to assimilate the real dimension of these events.
It is very positive news for Bitcoin to be increasingly accepted as a new form of apolitical and decentralized money.
The law that makes Bitcoin one of the official legal tenders in El Salvador along with the dollar has already been passed.
Let's do a brief analysis of the law and its positive aspects.
For those who don't know, the dollar has been the country's official currency since 2001 and will continue to be along with Bitcoin.
From now on, trading products can also be priced in Bitcoin, but due to the high volatility of the currency, I do not believe that it will be adopted in practice and the dollar should continue with this unit of account function.
Taxes can be paid in bitcoin, which is an excellent measure from my point of view.
Another very positive measure is that Bitcoin transactions will not be subject to taxation and collection of taxes in case of capital gain in any financial transactions within the country.
The only slightly problematic article is the one that says everyone must accept to receive bitcoin payments when the payer requests it.
As a supporter of economic freedom, even though it is very nice to be able to pay for a good or service with Bitcoin, I must disagree with this measure because I believe that in this aspect it makes much more sense that there is a free choice of the citizen.
However, a subsequent article ends up corrects the previous one, as it says that even if a merchant is required to accept bitcoin, he can choose to choose automatic conversion to dollar upon receipt, and this conversion mechanism will be provided by the government.
Merchants who do not yet have access to the necessary technology are also free to opt out of Bitcoin.
Old debts in dollars can be paid in Bitcoin if there is an agreement between the creditor and the debtor for the debtor to do so.
It is a great advance and an encouragement for us technology enthusiasts, but for now, the dollar remains the official and main currency of the country along with Bitcoin as a secondary official currency, which in a way ratifies a state currency as the most important.
For Bitcoin to become a universally accepted currency and the ultimate asset in an economy, it needs to go through the following process:
First, it must have the potential to be a good store of value, then it must be accepted as a currency in transactions, and finally, it must be a unit of account.
This evolution can take years to happen or even decades.
The main obstacles to being a bargaining chip are the technology itself, which is still not widespread, and the relative slowness and high fees of transactions.
As we know, this can be resolved with base protocol second-layer technologies such as Lightning Network.
Another of the most complicated problem concerns the exchange rate volatility, since Bitcoin fluctuates a lot in price, and this is one of the great impediments for merchants to adopt Bitcoin payments in trade and keep Bitcoin in their wallets.
For this reason, in the new law of El Salvador, there is this clause that guarantees by the state to traders the automatic conversion to the dollar, so that they are not at the mercy of these fluctuations.
Therefore, we can assume that very few merchants will keep a relevant part of their receipts in Bitcoin in their portfolio.
All this can be achieved with time, with the improvement of technology, innovation, etc., and, thankfully, little by little this is already happening.
So we must celebrate this news as another important step in this direction.
With only 12 years of existence of this revolutionary technology, who would have thought that in such a short time it would be made official by the government of a country?
It is an extraordinary event and shows how all these changes can be faster than we thought.
Research Source: El Salvador Government
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