After being the first country to recognize Bitcoin and cryptocurrency as a means of transaction for daily goods and services, El Salvador is coming up with better ideas to make this experiment a success story. El Salvador exempted foreign cryptocurrency investors from paying taxes on profits earned.
El Salvador Exempting Capital Gains Tax on Cryptocurrency
Javier Argueta, a legal adviser to President Nayib Bukele, is looking to encourage foreign investment through major tax breaks on Bitcoin, Agency France-Presse reported on September 10. “If a person has assets in Bitcoin ad makes high profits, there will be no tax. This is an obvious step to encourage the inflow of foreign investment.”
Javier Argueta further added that El Salvador will impose no taxes on “either the capital increases or the income.”
Argueta reportedly noted that the government of El Salvador would be actively tracing Bitcoin transactions on El Salvador’s official BTC wallet, Chivo, to combat the potentially illegal use of the cryptocurrency.
“We are implementing a series of recommendations from international institutions against money laundering,” Javier Argueta said.
The Chivo wallet would also temporarily halt Bitcoin transactions on the application if Bitcoin value collapsed to minimize the impact of extreme volatility or price fluctuations.
El Salvador became the first country to accept Bitcoin as a legal tender alongside the United States Dollar (which has been its only legal tender for 20 years.)
All local merchants of El Salvador have accepted the cryptocurrency Bitcoin as a legitimate legal tender.
In cooperation with global companies like Bitso crypto exchange and Silvergate Bank, El Salvador launched the official BTC wallet known as Chivo, allowing users to convert BTC transactions into the United States dollar or withdraw using a special ATM, with no transaction fees.
According to several social media reports, some Chivo wallet users have allegedly been still experiencing major issues with transacting or withdrawing from Chivo after El Salvador fixed the crypto wallet last week.
Here El Salvador’s strategic way of handling this seems extremely complicated, but on the other hand, it is necessary for fitting such a volatile unregulated entity must be a part of a country’s economy as a legal tender.