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After a slew of negative news for crypto over the past few weeks, we were due for some good news and we certainly got it. Although El Salvador's announcement that the country would soon be treating Bitcoin as legal tender with no capital gains tax and expediting permanent residency for crypto entrepreneurs stole the show, its not the only South American nation that is welcoming crypto. In this post, I'll get you up to date on all the ways that South American nations are embracing crypto.
El Salvador
By this point, the news that El Salvador will levy no capital gains tax on Bitcoin has made its way to every corner of the crypto world, and with good reason. Calculating capital gains taxes on crypto is an absolute nightmare, and eliminating that requirement is one of the easiest ways of making crypto an actual form of "digital cash". In the US, we have to calculate capital gains for every crypto transaction, so if I get paid .1 BTC every month and save for 10 months to buy a $36,000 vehicle, I have to calculate 10 separate capital gains taxes based on the fact that I paid for the car with 10 "different" Bitcoin that I received based on different valuations. Not tax advice.
By contrast, El Salvador's announcement effectively treats Bitcoin the same as cash and means that there will be no capital gains tax on Bitcoin. If you want to buy something with BTC, you simply pay for it. On top of that, El Salvador has announced that it will expedite permanent residency status for crypto entrepreneurs.
Note: At the time of writing this proposal has NOT been implemented as an actual law, and it is also worth pointing out two things.
1) Not paying a capital gains tax does not mean that there is no tax at all, and BTC still might be taxed as income. Although I don't think anyone likes paying taxes, I think that's a fair trade off. The government still gets its money while crypto users get to actually use their crypto instead of simply buying and holding due to the complex reporting requirements needed to sell crypto.
2) At the time of writing, this proposal has NOT been formally integrated into the law. It appears that the president of El Salvador has strong support and that passing the bill is likely, but it's not official just yet.
Paraguay and Brazil Welcome Crypto
Following El Salvador's lead, the National Deputy of Paraguay posted a crypto friendly tweet with laser eyes and the quote that the country needed to advance with the new generation and that they will start the week with an important project to innovate. The tweet also included a rocket emoji, Bitcoin emoji, and #BTC leading many people to believe that Paraguay is about to reveal some major announcements that will make it more crypto friendly.
It's a bit older news, but back in April, the Bank of Brazil announced that it would be the world's first state sponsored bank to allow customers to access a crypto ETF. According to the announcement, clients will be able to purchase the "HASH11" crypto index which is composed of a variety of coins including BTC. ETH. XLM, BCH, LTC, and LINK. I do have to point out that this was only offered to "professional investors", but the fact that Brazil has become the first state sponsored bank to offer this service to its customers is huge news. Imagine Jerome Powell coming out and saying that the Fed will be offering a crypto ETF.
More Updates
As usual, the US continues with more calls to regulate, tax, and track crypto. I think the US likes to be seen as a hub of economic freedom and innovation, which explains why it hasn't banned crypto. But, I believe there is also an understanding that most of the US political, economic, and military might is in some way dependent on the US dollar. The spread of crypto threatens USD hegemony, which is why I believe the US makes using crypto difficult whereas other nations that do not benefit from dollar hegemony have a lot more to gain from crypto adoption and are therefore more friendly to it. It's just my theory, and feel free to share your own.
SpaceX has teamed up with SpaceChain to send the world's first Ethereum node to the International Space Station on July 3rd. According to unofficial sources, the SpaceX mission to send an ETH node to the ISS has been named "Elon's Redemption." Obviously, that is a joke, but I say that to point out that although Elon Musk has faced criticism over some of his recent tweets, I think this shows that Elon is dedicated to advancing crypto. Especially as ETH moves towards its more energy efficient PoS system, I think that we might see more ETH support from Elon in the future.
Summary
After a rough few weeks in the crypto world, its nice to see some good news and it reminds us that the market is always changing. A few weeks ago, we got the news that China was cracking down on crypto, and this week we get El Salvador embracing crypto. A few weeks ago, Elon was criticizing Bitcoin, and now he's sending ETH to the moon (or at least the ISS). Overall, I think the news from this week is a good reminder that the future of crypto is strong, and it continues to grow, develop, and gain adoption.
As always, thanks for reading, and nothing is financial advice.
References
https://twitter.com/carlitosrejala/status/1401712725886132224
https://www.thestreet.com/crypto/bitcoin/politician-from-paraguay-calls-for-making-bitcoin-legal-tender
https://www.coinbriefs.com/2021/06/07/us-senators-call-for-increased-measures-to-regulate-and-trace-cryptocurrencies/
Image Credits
https://unsplash.com/
