The popular crypto-friendly country El Salvador has taken a huge step to improve economic growth via technology. It recently reviewed its tax system exempting technology innovations to boost developments. 

Recall that El Salvador was the first country that made bitcoin legal tender and pushing for more adoption. This latest move is expected to attract more developers into the country, given it has become a tax haven for them. 

El Salvador Offers Tax Exemptions For Tech Developers

President Nayib Bukele sent the bill to Congress on April 1. The El Salvador tax exemption covers developers in coding apps and AI development, software programming, communications hardware manufacturing, and computing. It eliminates all import tariffs, income capital gains, and property taxes from these sectors.

Further, Bukele outlined reasons for the tax exemption as the acceleration of manufacturing and innovation, such as semiconductors and microelectronic components. Also, the law aims to make El Salvador the leader in advanced technology manufacturing in Latin America. 

Further, the president aims to encourage, diversify and expand Salvadorean human talent toward technology manufacturing. He also wants to boost education and training in advanced technological manufacturing. 

The president also established a National Bitcoin Office (ONBTC) to support this recent move. The regulatory body will work hand in hand with bitcoin companies and entrepreneurs in the country. 

In a Twitter post, ONBTC announced that it would help position El Salvador as a technology and economic power worldwide. 

Notably, President Bukele had promised to pursue this decision on March 24. He made the announcement on Twitter, leading to positive responses as many users saw it as a step towards pushing the country’s tech industry. 

El Salvador’s Economic Dev’t Skyrocketed Following BTC Legalization 

Bukele had been a moving force driving El Salvador’s economic development. The president took the world by surprise when it legalized Bitcoin as a means of payment in the country.

The move on September 17, 2021 attracted much criticism. Still, on November 2021, the country inaugurated a bitcoin city backed by $1 billion BTC bonds to be a home for “everything around Bitcoin.” 

Bukele has continued to push adoption to date and has even established the Bitcoin Association of El Salvador to pursue the initiative further.

Notably, after legalizing BTC, El Salvador’s tourism skyrocketed by 30%. The Minister for Tourism, Morena Valdez, revealed the growth during an interview with a local news agency. She stated that before making BTC a legal tender, El Salvador only saw tourists from neighboring countries.

But after legalizing bitcoin, 60% of the country’s tourists now are from the U.S., boosting their income in foreign currency to $1.4 million beyond the projected $800,000. Also, El Salvador saw a boost in its exports as it grew by 13% in January 2022, beyond the 10.3% recorded in January 2021.

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El Salvador made global headlines in 2021 when it became the first country in the world to adopt Bitcoin as legal tender. Now, the country is planning to issue Bitcoin bonds, known as "volcano bonds," in 2023. This move is seen as a bold step towards cementing the country's position as a leader in the cryptocurrency space.

The announcement of the Bitcoin volcano bonds was made by El Salvador's President Nayib Bukele in a tweet on March 23, 2023. According to Bukele, the bonds will be used to finance the country's ambitious geothermal energy project, which is centered around the country's numerous active volcanoes.

El Salvador's geothermal energy potential is significant, and the country currently generates around 25% of its electricity from geothermal sources. The Bitcoin volcano bonds are intended to fund the development of new geothermal plants, which will increase the country's geothermal energy capacity and reduce its reliance on fossil fuels.

The volcano bonds will be denominated in Bitcoin, making them the first-ever Bitcoin-denominated bonds to be issued by a sovereign nation. The bonds will be sold to investors globally, and the proceeds will be used to fund the geothermal energy project.

The move to issue Bitcoin volcano bonds is significant for a number of reasons. Firstly, it highlights El Salvador's commitment to Bitcoin and the wider cryptocurrency space. By issuing Bitcoin-denominated bonds, El Salvador is demonstrating its confidence in the long-term viability of Bitcoin as a store of value and a means of exchange.

Secondly, the Bitcoin volcano bonds are expected to be attractive to investors due to the high potential returns offered by the geothermal energy project. The use of Bitcoin as the currency for the bonds also offers investors an opportunity to diversify their portfolios and gain exposure to the cryptocurrency market.

Thirdly, the issuance of Bitcoin volcano bonds could have a ripple effect on the global financial system. If the bonds are successful, other countries may follow El Salvador's lead and issue their own Bitcoin-denominated bonds. This could ultimately lead to the mainstream adoption of Bitcoin as a means of financing large-scale projects and could further cement the cryptocurrency's position as a legitimate asset class.

In conclusion, El Salvador's decision to issue Bitcoin volcano bonds in 2023 is a bold move that highlights the country's commitment to Bitcoin and the wider cryptocurrency space. The bonds offer investors an opportunity to gain exposure to the high-potential returns of the country's geothermal energy project while diversifying their portfolios with Bitcoin-denominated assets. The success of the bonds could have a far-reaching impact on the global financial system and could ultimately lead to the mainstream adoption of Bitcoin as a means of financing large-scale projects.

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