Will Others Follow El Salvador in Making Bitcoin Legal Tender? ; Mall Survival Secrets
El Salvador’s government has passed a bill declaring Bitcoin legal tender, making it the first country to accept the cryptocurrency as payment for all debts.
In a research paper, Lennard Neo, head of research at Stack Funds in Singapore, said, “We should not expect a substantial impact on Bitcoin for a country with a GDP per capita less than 7% that of the United States, with its economy experiencing the worst crash in decades last year.” “However, this is unquestionably a tiny but significant step in the right direction for Bitcoin.”
Other than as an investment, Bitcoin has limited application in other countries.
Turkey has outlawed the use of Bitcoin in trade, citing the potential of “irreparable” harm and transactional risk as reasons. China intends to restrict access to both domestic and international cryptocurrency exchanges. India is considering outlawing Bitcoin.
“It will be interesting to observe how other Latin American countries, such as Mexico, Paraguay, Brazil, and Argentina, respond to similar initiatives and, more crucially, reduce their dependency on US dollars,” Neo said.
Although Mastercard has stated that cryptocurrencies would be included to its payment system, El Salvador is the only country that accepts Bitcoin as payment for all debts, including taxes.
Bitcoin is frequently purchased and held by major investors as a gamble on future price increases. When the price of bitcoin fell, MicroStrategy took on more loans to increase its holdings. Blockchain activity reveals that many ordinary investors sold during the current market slump in an attempt to reduce their losses.
El Salvador’s new law also exempts Bitcoin from capital gains taxes, which might be a big benefit or at the very least a real-world test for other countries.
The United States appears to be on the other path.
President Joe Biden has proposed increasing the top capital gains tax to 39.6% from 20% to fund his $1.8 trillion American Families Plan.
Financial advisors said the proposed increase will hit long-term and short-term capital gains, because both would be taxed as ordinary income in the highest bracket.
This could lead some investors to sell assets before the tax hike becomes law. It’s unclear how extensive the selling would be or how the market would react.
Critics fear a higher tax rate could limit funds available. This is a brief summary.