In practically all the conversations that I have with businessmen and clients, the topic of fintech and cryptocurrencies is more than obligatory. The financial technology business has become the new object of desire, although we do not fully understand how they operate, how they are regulated and what are the inherent and residual risks when investing or speculating with Bitcoin, Ethereum, Dogecoin and Litecoin, to mention a few.
This excessive risk appetite is understandable, since the famous ceiling of $ 64,374 that Bitcoin reached was reached in the blink of an eye, although at the time of this writing the price has fallen to $ 33,539. Explaining such volatility is relatively easy: the value of cryptocurrencies is backed by the trust that users place in them, not by the endorsement given by a central bank.
Governments like the United States have warned that cryptocurrencies are being used by transnational organized crime, by terrorist groups and white supremacists, who seek to take advantage of the very essence of virtual assets: anonymity and the notorious difficulty in tracking operations. Many countries have understood the need for the financial system to evolve. Mexico is a clear example of this, since, thanks to the Fintech Law and the amendments to the Anti-Money Laundering Law, players in the financial technology sector have penetrated so much that Credijusto has just bought from Banco Finterra and this tells us that in Mexico there is a healthy fintech ecosystem.
But, on the other hand, there are governments, like Venezuela’s, that tried to create their own virtual currency, backed by their oil reserves, to turn around the US economic sanctions and mitigate (not fight) hyperinflation; or like that of El Salvador, which, in an alleged attempt to be disruptive, approved, on June 9, 2021, the “Bitcoin Law”, forcing people and companies to accept Bitcoin (or fractions of it, rather ) and not another virtual asset as a payment method, since it was assigned the same discharge power as money issued by its own central bank.
Legislators from President Bukele’s party took advantage of their majority to pass a law of only 16 articles, arguing that this decision would protect private initiative, increase national wealth, address financial inclusion and boost economic growth. The president, for his part, presumed that the use of Bitcoin will help Salvadorans to send remittances. That sounds great, but the law is full of deadly traps, as it states that exchanges in Bitcoins will not be subject to capital gains tax.
I hope that both the Central Reserve Bank and the Superintendency of the Financial System of El Salvador issue the secondary regulation that imposes the limits and controls that prevent what I predict here from happening. Playing the disruptive can even put the sovereignty of a country at risk.
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