El Salvador, the world’s first country to establish Bitcoin as a legal tender, has presented a bill to Congress to eliminate taxes on various technological innovations, including artificial intelligence (AI), computing, and communications hardware manufacturing. This move follows the establishment of the National Bitcoin Office (ONBTC), also known as the Bitcoin Office of El Salvador.

On March 24, 2023, President Nayib Bukele of El Salvador took to social media to announce his intentions to grant tax exemptions on income, capital gains, property, and import tariffs for tech innovations such as software programming, apps, coding, AI development, and computing and communications hardware manufacturing.

President Bukele stated, “Next week, I’ll be sending a bill to Congress to eliminate all taxes (income, property, capital gains, and import tariffs) on technology innovations such as software programming, coding, apps, and AI development, as well as computing and communications hardware manufacturing.”

In an interview with experts at Crypto Minded, President Bukele mentioned that he views technology as a means to counter the country’s dependence on the US dollar and hyperinflation. El Salvador has strategically invested in Bitcoin and utilized capital gains to rebuild the nation over the past 18 months.

Bukele’s goals

The project aims to stimulate development and attract foreign investment in the field, as per President Bukele. The bill was officially sent to Congress on April 1, 2023. The government of El Salvador has invested in education, infrastructure, and entrepreneurship programs to promote innovation and digitization across various sectors.

El Salvador’s adoption of Bitcoin as a legal tender has attracted global attention and sparked debates. While the International Monetary Fund (IMF) has raised questions about the risks, the success or failure of this experiment will be closely observed as the role of cryptocurrencies in the global economy continues to evolve.

El Salvador’s move to embrace Bitcoin has been considered bold and innovative, potentially inspiring other countries to follow suit despite initial criticism and skepticism.

The approval of Bitcoin as legal tender has facilitated remittance for Salvadorans living abroad, with the Chivo Wallet reporting onboarding 2.2 million users within a month of Bitcoin’s recognition.

The decision to open the country to Bitcoin has also attracted foreign investment beyond the blockchain industry. Investors are interested in various sectors, including hotels, real estate, and franchise companies.

President Bukele’s ongoing efforts to revitalize El Salvador involve the development of regional business hubs, promoting tourism, and counterterrorism measures. If the bill is passed, El Salvador could become an attractive destination for tech firms and entrepreneurs seeking to establish a presence there.

What this means for the crypto industry

The recent developments in El Salvador, with the country establishing Bitcoin as a legal tender and presenting a bill to eliminate taxes on technological innovations, have significant implications for the crypto industry. El Salvador’s bold move to adopt Bitcoin as a legal tender has attracted global attention and sparked debates about the role of cryptocurrencies in the global economy. The country’s tax exemptions on tech innovations, including AI and hardware manufacturing, demonstrate its commitment to promoting technological development and attracting foreign investment. If successful, this initiative could inspire other countries to explore similar approaches, leading to further growth and acceptance of cryptocurrencies worldwide. The decision to embrace Bitcoin has already facilitated remittance for Salvadorans and attracted foreign investment in various sectors beyond blockchain, indicating the potential for broader economic benefits.

El Salvador’s efforts to revitalize the country through technology and innovation could position it as an appealing destination for tech firms and entrepreneurs. As El Salvador’s experiment with Bitcoin unfolds, the crypto industry will closely monitor its progress and the lessons learned from this pioneering move.

Byline: Hannah Parker