Tuesday, July 27, 2021

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    can it be legal tender?

    El Salvador that already have the Bitcoin law in force and Paraguay plans to achieve its approval in July. How they are and how they can impact the country

    Cryptocurrencies became one of the most sought after investmentss by savers around the world, who seek to protect themselves from the vicissitudes of an economy in crisis due to the coronavirus.

    This behavior not only did it reach thes particular, but also to global giants they saw in the Bitcoin a form of cover up against devaluationn of the U.S. banknote resulting from the largest U.S. issue intended for incentives to hinder the stop of the activity. Like this several companies and even unicorns passed part of their treasury to Bitcoin (BTC):

    The finishing touch was given by Coinbase, which took advantage of the boom to go public and raise more than $ s6,500 million in its first day as a “public” company for migrate part of your accounting to bitcoin: almost 4,500 coins.

    The crypto advance did nothing but set off the alarm bells of major governments on the planet. In fact Janet Yellen, U.S. Treasury Secretary, heads a draft regulation after that Texas and Miami will begin to allow the use of virtual currencies.

    This has as a corollary the request for Christine Lagarde, President of the European Central Bank (ECB), who requires global regulation because it is a “highly speculative” asset.

    One of the entities under the ECB’s umbrella, Deutsche Bank, warned that cryptocurrencies “have exceeded a threshold that can no longer be ignored“, and also called for bringing legislation to life before these instruments compete more deeply with sovereign currencies.

    In this context, a small Latin American country has already shown the way and encourages others to follow. Few were surprised that the president of El Salvador, Nayib Bukele, will announce in early June the entry into force of the the region’s first crypto law, which establishes Bitcoin as legal tender.

    Thus, it can be used in place of the Salvadoran Colon – which is worth about $0.12 – for the daily payment of purchases, taxes and cancellation of debts. And it turns the Central American country into the first nation in the world to “make it official”.

    The law was supported by 64 of the 82 legislators and states that bitcoin can be used for “any transaction that people and companies, public or private, require to perform“. Moreover, the public administration bodies and other State entities.


    Cases like El Salvador will allow Bitcoin to have more adoption globally

    An interesting fact is that the exchanges and Bitcoin savings will not be subject to income tax, as well as the ho hogging of the official currency. Diego Balbi, from the CryptoWorld Networking Community, assures iProUP that “its adoption promotes a one-off benefit of cryptoassets: the democratization of finance“.

    “Approximately 70% of El Salvador’s population does not have access to traditional financial services. Therefore, the crypto ecosystem will open a door to that financial inclusion“, he points out.

    According to Balbi, the State is committed to conducting an “essential educational campaign so that the population has the necessary knowledge to adapt to this new reality.” At the same time, it stresses that the training and materialization of opportunities for access to technology will be the source of success or failure of this legalization and adoption as legal tender.

    “Beyond the purpose or political position of the rulers, the attempt to match reality with standards is commendable. they need to support it,” balbi remarks.

    In the same vein, Diego Nunes, attorney for Nunes y Asociados, describes the El Salvador’s initiative as super interesting and confesses that “it is a project in which we all have our eyes on”.

    “If it proves to be a success story, it will be a great incentive for the adoption not only of Bitcoin, but for each country to recognize in the Cryptocurrencies and blockchain technology practical solutions to problems not solved by traditional banking, “says the lawyer in dialogue with iProUP.

    From El Salvador, Marlon Ulises Pacheco Calidonio, lawyer and banking and stock exchange advisor, comments to iProUP that “unlike gold, bitcoin does not generate storage costs, and that makes it highly attractive.”

    The Government already plans to set up a mining farm taking advantage of the chain of active volcanoes of the country to reduce energy expenditure,” the lawyer says. The state firm La Geo will take advantage of the lava to generate geothermal energy (100% clean, renewable and zero emissions), in addition to the fact that the area has wide availability of this input and no heavy investment is required for its extraction.

    “It should be clarified that Bitcoin is a valuable asset due to its scarcity, there will only be 21 million units, while fiat currencies (dollar, euro,…) can be printed unlimitedly, thus eroding the exchange rate and people’s pockets,” says Pacheco Calidonio, noting the inflation that afflicts much of Latin America.

    Next on the list

    Even though Panama he fancied to follow in the footsteps of El Salvador, the next Latin American country to legalize Bitcoin could be Paraguay. This week, legislator Carlos Rejala presented to Congress a bill to officially adopt cryptocurrency.

    Rejala goes beyond its everyday use: aims to make it an attractive area for crypto investors and thus place yourself among those who are at the cutting edge of digital technology.

    The idea is not unreasonable: because of low energy costs, an economy without ups and downs and a favorable business climate, Paraguay concentrates several crypto mining farms and is, along with Argentina, one of the most seductive countries in the region to develop the activity.

    Although Rejala, during the presentation of the project mentioned that Paraguay seeks to differentiate itself from El Salvador because they do not pretend to be a currency of exchange, but are talking about intangible assets, where the commodity becomes the final product.

    Nunes mentions that this project is definitely positive but, if it does occur, “it has to be a resounding success story in several countries before Argentina considers it. Enabling a second legal tender greatly affects the issuance policy.”

    In addition, he notes that the country, historically, “was always against having more than one legal tender. There were projects to make the dollar so and they didn’t prosper.”

    However cryptoassets bill still awaits Congress. And while it does not intend to give legal tender to bitcoin, it will offer a regulatory framework for industry.

    Another country that is working on a possible Bitcoin law is Mexico. A first initiative was published in March 2018 and was called fintech law. This law regulates: virtual assets, i.e. digital currencies, financial advice, crowdfunding and electronic payments.

    And it defines virtual assets as “a virtual asset the representation of value recorded electronically and used among the public as a means of payment for any type of legal act and whose transfer can only be carried out through electronic means“.

    Although the Mexican Government’s official position is to show some mistrust. Arturo Herrera, Mexican Finance Secretary, warns that the use of cryptocurrencies is not allowed in the country’s financial system, be it Bitcoin, Ether or XRP.

    Paraguay and Panama follow the same path as El Salvador

    Paraguay and Panama follow the same path as El Salvador

    Nicolás Verderosa, CEO of Kephi Gallery,commentto to iProUP that the regulation of cryptocurrencies can be a very positive thing as long as it is wide.

    “Most have collection targets or prohibitive issues as in China. Broadly speaking, I think the crypto world reacts contrary to what states presume is going to happen, and the higher the ban the greater the demand. I think Mexican regulation is one of the broadest of the regions.”

    In fact Ricardo Salienas Pliego, one of the richest men in Mexico, said that Salinas Group will acquire this cryptocurrency and could even have only Bitcoin in your wallet investment over the next few 30 years. The holding company operates firms such as Banco Azteca and the TV Azteca channel, as well as stock exchange companies and other businesses.

    Argentine approach

    As anticipated iProUP, in Parliament there is a bill presented by deputies Liliana Schwindt and Marcos Cleri (Front of All) to regulate the activity, allow further development of the sector and that could be enacted this year.

    “Our legal department read the text and it’s quite in tune with the activity that we have been developing. It’s a good initiative“, state to iProUP from one of the most recognized exchanges in the local market.

    There is also a draft signed by Deputy Ignacio Torres (Together for Change) which features the endorsement and advice from several local cryptocurrency firms and that he started conversations with some “small” banks interested in entering this niche.

    According to surveys of iProUP, there are already several entities that are hiring digital asset experts for, in the future, go out and offer crypto products.

    Both bills propose the first legal definition of cryptoasset as the digital representation of value, which may be based on the blockchain and used as a medium of exchange, value store and unit of account. Basically, the three functions of money.

    In addition sets out the following issues:

    • They are not necessarily issued or guaranteed by a central bank or public authority
    • They may not have the legal status of currency or money and are decentralized in nature
    • They are accepted by natural or legal persons as a means of exchange or payment or investment purposes
    • Can be transferred, stored and marketed electronically

    In addition, in the crypto ecosystem they interpret that the law will be debated soon, after the Central Bank ask the banking chambers ABA, ABPPRA and ABE than the partner entities report the customer data they could be trading with these instruments. In addition, the monetary authority and the National Securities Commission released a joint statement warning about the volatility and risks of using them.

    “Under the precept of what is not forbidden is allowed, a law is not needed. But the problem with this is that there is no future legal certainty,” he warns. iProUP Rodolfo Andragnes, co-founder and current president of the NGO Bitcoin Argentina.

    According to the expert, “some certainty can promote or reduce the incentive to the development of the industry”, but “because they are poorly drafted and have not been agreed with suitable experts, leave the door open to free interpretation by the bitcoin holder or the watchtoo“.

    In this way, the Argentina aims to have a crypto law that maximizes the country’s potential, such as the high degree of acceptance of these currencies, talent for developing blockchain solutions and a strong ecosystem of companies.

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