17 June, 2021
A minister from El Salvador’s Labor and Social Welfare department clarified that it is outside his purview to state whether salaries can be paid in bitcoin.
This statement from Rolando Castro followed a report by local media which quoted him as saying that “it was too premature” to consider the change.
Castro stated that it was a matter that would be considered by the Ministry of Finance and the Ministry of Economy in an interview with journalists. He went to say that the implications of recognizing bitcoin as legal tender would be reviewed in due course. Instead, the minister would focus on job creation and stressed that he wouldn’t have much to do with bitcoin’s role in salary payments.
The country’s laws state that salaries must be paid in legal tender, which bitcoin now is. With the new bill, the cryptocurrency can be used to pay taxes, but little has been said about the matter of salary payments. President Bukele also plans to mine BTC using energy from volcanoes.
President Bukele has said that recognizing bitcoin as a currency would help its citizens and boost the economy. However, critics argue that the volatility of bitcoin could affect employees greatly. Citizens will be keen to avoid losses due to bitcoin’s occasional heavy fluctuation.
The primary contention is the volatility, as one of the clauses in the law states that the market will freely establish the exchange rate between bitcoin and the dollar. Other countries have also noted this problem, but El Salvador is the first that will be attempting to tackling the issue.
In being the first country to accept bitcoin as legal tender, El Salvador sets itself up for several challenges as it reworks many aspects of the economy to fit the new currency.
The new bill has caused some trouble for officials, some of whom have asked for the government to repeal the law. Analysts have said that companies should have the option of paying bitcoin as legal tender, i.e., leaving it at the discretion of the companies to make payments in bitcoin.
Meanwhile, the International Monetary Fund (IMF) has also said the new law would raise many questions. A spokesperson for the organization foresees macroeconomic and legal issues with accepting bitcoin as legal tender. El Salvador’s officials are expected to discuss the change with the IMF soon.
Officials will likely offer a clearer view of how bitcoin will fit into the country’s economy in the months to come. As it stands, officials are still deliberating over the matter.
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