El Salvador Foreign investors will be exempt from tax on profits on bitcoin speculation in the country, a government advisory said on Friday, as it became the first to recognize the cryptocurrency as legal tender.
“If a person has assets in bitcoin and makes a high profit, there will be no tax. It (so) is clearly to encourage foreign investment,” Javier Argueta, legal adviser to President Nayib Bukele, told AFP. Has been done.”
“There shall be no tax to be paid on capital growth or income.”
El Salvador on Tuesday introduced bitcoin as legal tender alongside the dollar, which has been the official currency for 20 years.
Experts and regulators have highlighted concerns about the cryptocurrency’s notorious volatility, its potential impact on price inflation in a country with high poverty and unemployment, and a lack of security for users.
There are also fears over its potential for illegal use – particularly in laundering money from criminal activities such as drug trafficking, and in the financing of terrorism.
According to Arguetta, the cyber “wallet” that allows Salvadorans to buy and spend bitcoin at home and abroad includes a “relevant mechanism” to ensure traceability.
“We are implementing a series of recommendations from international institutions against money laundering,” the advisory said.
He added that bitcoin transactions will be temporarily halted if its value ever drops, in order to mitigate the effects of extreme currency volatility.
The government says its use will give many Salvadorans access to bank services for the first time, and is expected to reduce millions of dollars in commissions on remittances sent from overseas, primarily from the United States.
Remittances account for more than a fifth of the country’s GDP.
MAV/LBC/DRO/Lab/MLR/DW
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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