Off the top is the simple fact that this step would represent the first nation in the world that would formally recognize and utilize bitcoin as legal tender; a dramatic step forward for wider adoption and utilization.
The longer term implications of this legislation are, obviously, very difficult to forecast at this point in time, but there are a few items that should be a part of this conversation.
De-dollarization – Perhaps most pointedly is the fact that monetary and fiscal policy steps occurring the United States do not occur in a vacuum.
Specifically, the fact that El Salvador actually had previously adopted the U.S.
Something that has been said innumerable times in the accounting and tax space is that the tax treatment for cryptoassets needs to evolve and keep pace with market innovation.
Especially in light of recent global tax policy coordination among G-7 nations regarding tax rates, this might be an opportune time for further conversations around how crypto should be integrated into current tax rules.
One other point that should be raised is how developments such as this might change the relationship between nations that classify bitcoin as legal tender compared to those that do not.
Something else that this recent announcement has seemingly moved against is the rising narrative and conviction that stablecoins – be they privately issued or government issued – were the inevitable future of crypto functioning as legal tender and currency.
This announcement, however, adds another layer of complexity and nuance to this debate, with bitcoin representing the first crypto to be accepted as legal tender at a nation-state level.
If some market participants thought that interest and investment in crypto had plateaued after a flurry of activity earlier in the year, this recent news shows the folly of trying to perfectly time such a fast moving market.
I serve on the Advisory Board of the Wall Street Blockchain Alliance, where I chair the Accounting Work Group.