El Salvador’s Plan to Court the Crypto Community

In an effort to attract foreign investment and bolster the economy of his country, El Salvador’s President Nayib Bukele announced a series of legal reforms being sent to congress for consideration. Among those reforms relevant to the crypto community are tax incentives, new securities laws, and the one garnering the most attention, an exchange of citizenship for investment. Details beyond this are unknown, but Bukele’s plans to make El Salvador a destination for crypto investors are chief among his designs.

Bukele achieved global recognition back in September when El Salvador became the first country to accept BTC as legal tender, placing it on the map as a destination for cryptocurrency investors around the world.  Despite the popularity garnered among the crypto community, this policy was met with external criticism. 

Early this year, the International Monetary Fund (IMF) put out a memo regarding the BTC adoption, stating that there are “large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection” and urged it to be removed as legal tender.  Furthermore, the board members stressed that without such a reversal in policy the country’s request for a $1.3 billion loan from the institution was in jeopardy.

The volatility of BTC is undeniable, but for countries like El Salvador, which have either abandoned the use of native currencies or maintained ones that suffer from hyperinflation, policy moves like this aren’t as irrational as they seem.

Bukele’s effort to attract foreign investment through incentives like citizenship may prove successful, especially when one considers cryptocurrency’s growing popularity coupled with an increase in restrictive laws coming out of developed nations. If passed by El Salvador’s congress and matched with further incentives, Bukele’s gamble could very well hand him a wealthy burgeoning community seeking a safe haven for their businesses and assets.