El Salvador will exempt foreign bitcoin investors from taxes. The government of El Salvador will exempt foreign investors from capital gains tax and approach tax on transactions with bitcoin. Javier Argueta, the presidential adviser on legal issues, said this in a comment to AFP.
The step is aimed to “encourage foreign investment,” the official said.
Thus, the authorities intend to fight the use of bitcoin in illegal activities. To do this, the Chivo crypto wallet has a payment tracking mechanism, according to Argueta.
This will reduce the negative consequences
“We are implementing a series of recommendations from international institutions against money laundering,” Javier noted.
Moreover, the adviser pointed out the possibility of suspending transactions with bitcoin in the event of a sharp drop in the exchange rate. This will reduce the negative consequences of using cryptocurrency as a means of payment, he added.
Recall that on September 7, a law on recognizing bitcoin as a legal means of payment came into force in El Salvador.
The integration of the Chivo wallet
Payment companies and systems can lose up to $1 billion a year due to the integration of the Chivo bitcoin wallet into the financial system of El Salvador. This is how Mario Gomez Lozada, the founder of the Liquid Cryptocurrency Exchange, estimated it.
Lozada gave a rather aggressive assessment, talking about the potential losses of payment companies. Earlier, the President of El Salvador, Nayib Bukele, said that the citizens of the country annually enrich the money transfer systems by $400 million.
Therefore, according to AFP, money transfers to the country form 20% of its gross domestic product (GDP).
“Remittances are one area where the status quo in our legacy financial system is terrible. With extraordinarily high fees leveled at populations that can ill afford them”. Matt Hougan, a chief investment officer of Bitwise Asset Management said.