Even in the midst of a bear market, El Salvador is raising its gamble on cryptocurrency. The first nation to recognise Bitcoin as legal tender is now drafting a law on the issuance of digital assets that would make it easier to deal with any crypto asset.
The bill would govern the transfer operations of any digital asset, attempting to “promote the efficient development of the digital asset market and protect the interests of acquirers,” according to a document that can be seen on the National Assembly of El Salvador’s official website.
The law’s novelty is in the way it distinguishes digital currency assets from all other assets and financial products, thereby giving them a specific regulatory framework. The law makes it clear that a digital asset must make use of a distributed ledger or a comparable technology in order to qualify for this classification. Perhaps the most well-known distributed ledger technology to date is the blockchain.
Transactions involving CBDCs are not covered by the law’s framework since they are fiat currencies subject to national financial regulations, as are assets not authorised for trading or exchange, assets with restricted transactions, such as securities, and sovereign assets covered by foreign laws.
The new law was swiftly met with criticism. President Nayib Bukele’s implementation of the Bitcoin Law has drawn sharp criticism from Salvadoran hacktivist Mario Gomez, who contends that it was crafted to help distressed foreign businesses and promote El Salvador as a haven for the cryptocurrency sector.
He asserted in a Twitter thread evaluating the situation that “the reason why these companies focus on small countries is because it is easier to sit directly with a president being a big company and implement measures that benefit (them).”
In June 2021, President Bukele presented the infamous Bitcoin Law to Congress. It was swiftly passed by the National Assembly with a sizable majority of the pro-government party a few hours later. If this is any indication, the new law will probably take effect in a similar haste.