This post was most recently updated on December 14th, 2022
Money deemed “legal tender” by the law may be used to pay off a debt. Some nations do so in addition to or in place of their currency, but this is the case for the vast majority. Last year, El Salvador officially became the first country to accept cryptocurrencies as payment.
Before a country endorses cryptocurrency as a legal tender, its advantages and disadvantages should be weighed alongside human rights, according to Platincoin.
● Bitcoin has No Capital Gains Tax
Due to Bitcoin being legal tender, capital gains tax is no longer applicable. This change results in an additional financial gain for bitcoin owners as the value of bitcoin rises.
● No Longer Subjected to the Dollar Dominance
El Salvador’s national currency is the dollar. Adding bitcoin to the list of legal currencies can help reduce the influence of the United States. The U.S. dollar is frequently used as a reserve currency. These nations virtually lack control over their monetary systems and are subject to the US central bank’s poor decisions and restrictions.
Every nation and person needs money that cannot be controlled or inflated by a centralized authority. This money must have a finite supply that can only be changed in response to measurable, objective conditions.
● Access to markets and financial services for everybody
According to Platincoin, anyone with internet access can create a bitcoin wallet. Using Bitcoin, anyone can access financial tools that would be hard to get normally and tightly controlled in other ways.
● No Requirement to Use Custodial Wallets
El Salvador has no restrictions on the types of wallet services used. Users now have autonomy and control over their assets. In contrast to traditional bank accounts, assets kept in non-custodial wallets, hard wallets, or abroad are not subject to government monitoring or seizure, which can offer security in tumultuous or dishonest political climates.
● Forcing Merchants To Accept Bitcoin
Article 7 of the recently enacted law stipulates that Bitcoin is legal tender and that retailers are “obliged” to accept it as payment. The provision gives only a small amount of additional information. The most straightforward interpretation of this phrase suggests that businesses will be required to accept Bitcoin at the current exchange rate.
Thanks to existing tools, Bitcoins can be traded for dollars by merchants with relative ease. Platincoin recommends that merchants can utilize these solutions without keeping Bitcoin or incurring any risks. In the worst-case scenario, it compels businesses to engage in transactions with a potentially volatile currency. Even though everyone in the cryptocurrency community agrees that bitcoin should be legal tender, users who believe that everyone should be able to choose their transaction currency will oppose this.
● Bitcoin Price Fluctuations
When the price of bitcoin rises and falls, so do the prices of items that Salvadorans buy and sell with bitcoin. Due to Bitcoin’s volatility, this is a temporary problem. As time progresses and the global adoption of Bitcoin grows, the frequency of price fluctuations will diminish.
According to Platincoin, cryptocurrency can function as a legal tender, but it may not. It depends on whether your country deems it acceptable; it reduces expenses, eliminates some payment complications, and facilitates the movement of funds. And it has some downsides as well. To accept cryptocurrencies as legal cash, you must weigh the pros and cons of your available options.