Thread by @GeorgeSelgin

Thread: So, after much back-and-forth on this with my Bitcoin friends (and critics), Here are my further thoughts on El Salvador and all that.

I think that casting what Bukele intends to do there in terms of making Bitcoin "legal tender" has been a source of considerable confusion (and I mean mine not just others). Strictly, whether something is "legal tender" or not usually isn't of great importance.

Bukele has promised to give Bitcoin the same tax treatment as any foreign currency. This really is a tax matter, not a matter of "legal tender" status: this should be obvious enough from the fact that foreign currencies except the UDS are not legal tender in El Salvador!

Though that may make El Salvador an attractive haven for BTC investors, it is unlikely to encourage greater use of BTC as a medium of exchange.

That's so because under current Salvadoran law capital gains "realised [sic] within 12 months following the purchase date" are already "taxed as ordinary income." taxsummaries.pwc.com/el-salvador/co… That pretty much exempts all ordinary monetary transactions.

(Plus we have the example of El Zonte, where BTC has been freely in use with no capital gains taxes being levied.) Still, Bukele's pro-Bitcoin posturing--for it is mostly that--may make some Salvadorans more willing to accept or deal with Bitcoin.

Although it's conceivable that Bukele's plan would allow El Salvador's banks to accept Bitcoin deposits, thereby creating a new sort of Bitcoin "2nd layer" medium, to assume so is a big speculative jump at present.

As it stands, the plan will mainly attract Bitconer expats, and may prove a boon to El Salvador's economy that way.

Personally, I'd be thrilled to see BTC actually displace the USD as El Salvador's dominant money. It would make for a fascinating test of the national viability of a "Bitcoin standard."

But I won't be holding my breath waiting for it to happen--not so long as Salvadoran's can exercise free choice in currency, and provided the U.S. government doesn't itself try to deprive them of good-old American dollars.

Sorry: Bitcoiner (not a Freudian slip--just atypo.)