Bitcoin Makes Mainstream Debut With El Salvador Move
It had to happen. Bitcoin is now the officially accepted currency of a sovereign state. All the usual objections – potential for money laundering, pandering to criminals, wild volatility – have been swept aside. Bitcoin is currently trading at more than $51,000, having hit highs of more than $52,500 in recent days.
We take a look at how our friends in the mainstream media have been analysing the development.
The central American nation today sets a world-first as it adopts the cryptocurrency for use across all goods and services – even taxes.
The move was pushed forward by President Nayib Bukele who has long sung the praises of the digital currency and has courted controversy throughout his tenure. For instance, this week he also called for mandatory retirement of judges over the age of 60 – meaning a dismissal of one third of judges currently serving.
Bukele has framed the adoption of Bitcoin over Twitter as needing to “break the paradigms of the past” and that “El Salvador has the right to move toward the first world.” The plan is reportedly aimed at reducing or eliminating the $400 million El Salvador spends annually on commissions for remittances – largely sent from the US.
The country’s legislature convincingly passed the law on June 9, with 62 in favour, 19 opposed and three in abstention. Yet, a report released by JP Morgan following the ‘Bitcoin Law’s’ passing found that a 54% of Salvadorans viewed the law as “not at all correct”, 24% felt the law was “only a little correct” and just 20% were in favour of its approval.
The International Monetary Fund (IMF) also warned of the risks that Bitcoin adoption could present given its volatile nature, and others have raised concerns that this new legal tender could tarnish El Salvador’s efforts to seek financing from the IMF. Moody’s also downgraded the nation’s creditworthiness when the Bitcoin Law was passed.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
- Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.