Recently, we reported that the government of El Salvador officially recognized Bitcoin as legal tender, to be used alongside the national currency and the US dollar. It seems that this small Latin American country is ready to take bold steps in this direction. The nation’s parliament has approved the launching of a new Golden Visa program. Its unique feature? Foreign investors can obtain permanent residency in El Salvador exclusively by investing in Bitcoin (BTC).
Program Details
According to the terms, the minimum threshold for crypto-investors from other countries to gain permanent residency in El Salvador is 3 BTC. As of mid-June 2021, this amounts to approximately $110,000. However, it’s important to consider the high volatility of Bitcoin, like any other cryptocurrency. Regardless of the exchange rate, the investment amount will be denominated in Bitcoin.
Under the program, Bitcoin can be invested in Salvadoran real estate or local business development. Officials are expected to soon approve a list of eligible investment objects and expand the program’s options. Besides the required investment, applicants will undergo a due diligence procedure, as is standard for investor programs worldwide.
Technical Details of the Process
Given the novelty of this initiative, the government has committed to developing a range of technical measures to facilitate the crypto-investment process. These are based on five key principles:
- The Law Recognizing Bitcoin as Legal Tender: Enacted by Parliament.
- Abolition of Capital Gains Tax: Applicable to Bitcoin transactions.
- Permission to Pay Tax Obligations in Bitcoin.
- Creation of a National Fund: This will allow citizens to exchange BTC for dollars.
- Establishment of a Government-Managed Cryptocurrency Wallet: To enable currency conversion.
An important note: a three-month adaptation period has been planned, during which the necessary infrastructure will be tested.
Potential Risks and Benefits
International experts and market analysts have emphasized the need for El Salvador to carefully consider investors' strategic plans. Wealthy foreigners seeking residency in this small and economically modest country must demonstrate the seriousness of their business intentions and a genuine interest in contributing to the economy. Otherwise, the project risks becoming merely a tax haven in cryptocurrency form.
Moreover, given the global nature of the “crypto project,” the government should prepare for a significant increase in BTC transactions. These transactions are likely to occur not only in major banks but also in everyday settings, such as small shops, cafes, and gas stations.
At the same time, analysts suggest that the “freedom of Bitcoin” and blockchain technology can potentially inject substantial financial resources into El Salvador’s economy. The country’s residency program could become an attractive product for immigrants.
It’s also possible that neighboring countries might follow El Salvador’s lead, especially if its initiatives prove successful. Notably, Mexico, Argentina, and Brazil have already expressed interest in El Salvador’s financial strategies.
