El Salvador Lures Foreign Investors as BTC Rally Puts Country in Profit

Salvadoran President Nayib Bukele’s Bitcoin strategy has started paying off, as the coin price has rapidly grown in recent weeks. The Nayib Bukele Portfolio Tracker website shows that with BTC hitting a new ATH of $73,000, the country’s crypto treasury was $85 million in profit as of March 14.

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Even though Bitcoin-oriented initiatives in El Salvador are proving successful now, the level of real adoption of the cryptocurrency, which became legal tender in the country in 2021, is not that high. Recently we observed that Salvadorans do not often use Bitcoin in their everyday lives.

The tracker shows that the country now has over 2860 BTC in holdings. Unfortunately it doesn’t reflect Bitcoin incomes from other governmental initiatives, but according to Bukele’s social media, the actual holdings are bigger as they include revenues from the country’s passport program, converting BTC to USD for local businesses and BTC mining.

The passport program refers to a migration law, approved last December, that grants citizenship to foreigners who make bitcoin 'donations' to the government, allowing those who qualify to skip the usual requirement of a certain period of permanent residence.

The same month, El Salvador's proposed Bitcoin Bond (or Volcano Bond as they like to call it) received regulatory approval from the Digital Assets Commission. The bond is to be issued in 2024 and was so named due to the use of geothermal energy from volcanos to power Bitcoin mining. Shortly before this the country launched its first mining pool through a partnership between Volcano Energy and Luxor Technology.

Meanwhile, the country has also been introducing initiatives not directly connected to Bitcoin. El Salvador recently changed its income tax law, lowering the tax on unlimited international investments and money transfers from 30% straight to 0%.

“We reformed the Income Tax Law so that family remittances or any capital from abroad is introduced to the country free of this tax, regardless of the amount.”

Congress has reformed our income tax law, for international investments and money transfers, dropping the rate from 30% to 0%.

La Asamblea ha reformado la ley del impuesto sobre la renta, para inversiones internacionales y transferencias de dinero, bajando la tasa del 30% al 0%. https://t.co/YRDVegSbb5
— Nayib Bukele (@nayibbukele) March 13, 2024

Last year, El Salvador removed all taxes related to tech innovation. The Law for the Promotion of Innovation and Manufacture of Technology, suggested by Bukele, eliminated all income, property, and capital gains taxes on technology innovations “such as software programming, coding, apps and AI development, as well as computing and communications hardware manufacturing” for 15 years.

These two taxation system amendments together with the fact that the country has become significantly more secure over the last years, could make El Salvador a lucrative place for start-ups and investors.

“We did it with security, now we’re going to do it with the economy. We’ll prove them wrong… again,” - promised the recently re-elected Bukele.

With huge profits from Bitcoin holdings and support from the Legislative Assembly (which now almost entirely consists of Bukele party’s members), the president indeed has a chance to create a better and more stable economy, but the budget surplus itself is not enough.