Thread by @Avik

President of El Salvador announced at @TheBitcoinConf that he is introducing a bill to make #bitcoin legal tender in the country. This is a major development in the history of monetary policy.
via @YouTube

There are many reasons why this is significant. 1/ in the US, #bitcoin is treated by the IRS as property, which means that every time you try to spend it it’s a taxable event. If $BTC is now a currency, it can be spent in a non-taxable way just like Euros or British pounds.

If the IRS needs to treat Salvadoran bitcoin as a currency, it makes bitcoin much more viable as a medium of exchange. 2/ because Salvadoran banks will need to allow citizens to deposit & withdraw bitcoin, $BTC becomes much more deeply integrated into the global banking system.

Here is a press release from @JackMallers, an early Bitcoin pioneer who helped engineer the El Salvador legislation. businesswire.com/news/home/2021…’s-First-Country-to-Adopt-Bitcoin-as-Legal-Tender

Another key aspect of this from @CaitlinLong_: Bitcoin as legal tender makes it much easier for corporations and other institutions to hold it on their balance sheets, because the GAAP accounting rules for currencies are much simpler than the ones currently in place for $BTC.

Today, $USD is the official currency of El Salvador. That’s explicitly why they’re making this move. @federalreserve moves to massively increase the quantity of $USD have detrimental, inflationary effects on countries like SLV that use dollars as legal tender or peg to the $USD.

In other words, El Salvador isn’t making #bitcoin legal tender in an attempt to be trendy. This is an attempt to protect Salvadorans from inflationary U.S. policy. A number of other countries could follow SLV’s lead. Caribbean nations would be of particular importance.

More on the rationale for this #bitcoin move from the President of El Salvador, Nayib Bukele:

From the proposed legislation: “Central banks are increasingly taking actions that may cause harm to the economic stability of El Salvador...in order to mitigate the negative impact of central banks, it becomes necessary to authorize the circulation of a digital currency with...

“...a supply that cannot be controlled by any central bank and is only altered in accord with objective and calculable criteria.” I.e., #bitcoin.

Here’s the front page of the El Salvador paper today:

Another key point: some people, like @RayDalio, worry that as #bitcoin becomes more successful, the U.S. may seek to ban it. But is the U.S. willing to ban the exchange of legal tender with other nation states like El Salvador? That becomes a lot harder.

Today, El Salvador is best known in the U.S. as a source of migrants. In the future, if @nayibbukele is successful, El Salvador may become best known as a destination for emigrants *from* the United States, especially those who care about building the #Bitcoin ecosystem.

As @balajis notes, efforts by the G7 to coordinate tax increases on corporations is a striking contrast to El Salvador’s effort to reinstall sound money.

Think about it this way: the GDP of El Salvador is $25 billion. the market value of all the crypto in the world is $1640 billion. A relocation of 1.5% of the world’s crypto to #SLV ($25 billion at today’s prices) would be transformative.

Here is El Salvador president @nayibbukele describing the immigration & economic incentives for crypto entrepreneurs to move to his country, including "immediate permanent residence" and no taxes on property or #Bitcoin gains.

Today, I've published a deep dive into El Salvador president @nayibbukele's proposal to adopt bitcoin as legal tender @Forbes. Could El Salvador become the global capital of the #Bitcoin ecosystem? forbes.com/sites/theapoth…

In the Forbes piece, I conclude: "El Salvador may be the smallest country in North America. But if President Bukele’s bitcoin proposal becomes law, El Salvador could become one of the most significant monetary centers in the world." forbes.com/sites/theapoth…

Full video of my chat w/ @CoinDesk TV's @christinenews on the historic significance of El Salvador's move to adopt #bitcoin as legal tender. We also discuss Trump's responsibility for $USD inflation, and how to think about what may be Salvadoran FUD. coindesk.com/video/bitcoin-…

El Salvador's Sec'y of Commerce & Investment, @MiguelKattan1, held a press conference yesterday where he emphasized that the country is not getting rid of $USD. "What the law will say...is that you can pay [with #BTC]" if people want to transact that way.

Obviously, once we have the full formal proposal from @nayibbukele on adopting bitcoin as legal tender, we'll know more about how deeply El Salvador intends to integrate #bitcoin into its financial system.

According to Salvadoran newspaper El Mundo, "Kattán reiterated that the model to be implemented in the country is one similar to the one developed on a small scale at El Zonte beach with @Bitcoinbeach."

Salvadoran President @nayibbukele has officially sent his #bitcoin legal tender proposal to the legislative assembly. Looking forward to reviewing the text.

Here is the Spanish version:

I've transcribed the English version of @nayibbukele's #Bitcoin Law @FREOPP for easier analysis. The bottom line: this is about as robust an endorsement of #bitcoin as legal tender as one could expect. freopp.org/el-salvadors-b…

The key article is No. 7: "Every economic agent must accept #bitcoin as payment when offered to him by whoever acquires a good or service." (An exception is later made for those who "do not have access to the technologies that allow them to carry out transactions in bitcoin.")

Article 4 specifies that "tax contributions can be paid in #bitcoin." Article 5 that "exchanges in bitcoin will not be subject to capital gains tax, just like any legal tender." Article 6 preserves the use of $USD "for accounting purposes."

El Salvador's proposed Bitcoin Law makes clear in several places that the government will provide resources to ensure that Salvadorans can be trained in the use of #Bitcoin, and gain access to the technologies (e.g. smartphones, software, bandwidth) necessary to use it.

The policy content of the El Salvador Bitcoin Law is pretty straightforward. #Bitcoin will be instantly convertible into USD, and will have the same legal standing as USD for commerce and legal obligations. If it passes the @AsambleaSV, it will be a remarkable achievement.