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Bitcoin legal tender in El Salvador

Chris Hamblin, Editor, London, 11 June 2021

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Now that El Salvador has become the first country in the world to classify Bitcoin as money, with several other South American countries preparing to do the same, a glitch might appear in the country's money-laundering regime.

It was in June 2019 when the Financial Action Task Force, the world's anti-money-laundering standard-setter, issued an interpretive note to Recommendation 15 on the subject of new technology, the better to deal with the phenomenon of the crypto-currency Bitcoin. El Salvador, however, now seems to be obliged to deal with Bitcoin in relation to all the other recommendations (which prohibit the use of real money - now including Bitcoin - that is tainted by crime) as well. The FATF's famous '40 recommendations' do not appear to take account of the eventuality of crypto-currencies becoming official money. It is unknown whether the Ecuadorian Government has yet taken account of this.

Bitcoin is now a medium in which Salvadorians can settle their debts. The British Broadcasting Corporation says that every business must accept it as such unless it lacks the technology to process the payments - a problem that is unlikely to beset banks and asset managers.

Many politicians in Panama, a major offshore centre, have said that they would like to see their jurisdiction follow El Salvador's lead and its assembly is to debate this in late July. Argentinian, Mexican and Nicaraguan politicians are thinking of doing the same. Meanwhile, Congressman Carlos Rejala of Paraguay wants to introduce a Bill into his nation's legislature in July. This will not make Bitcoin legal tender, but a later Bill might go farther and Rejala is keen to make it happen.

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