Forget Silicon Valley, El Salvador has finally ratified its impressively bold plan to wipe out any taxes related to various technological innovations. This includes AI, computer programming, and app development. While we can only measure how successful this move will be through the prism of a decade or more, it is a plan that has worked well for countries in the past.
It is a surefire way to generate innovation and encourage multi-billion-dollar companies to establish their base in your country. While the idea of swapping Silicon Valley for San Salvador might not immediately get tech executives sitting up and taking notice, Nayib Bukele has provided a solid foundation for companies to move in and operate with the financial freedom they can’t get in other countries.
While it is a gamble and a big step, Bukele is no stranger to taking significant risks. It is common knowledge that El Salvador is the world’s leading country in embracing Bitcoin and digital assets. Moreover, it is one of only two countries where you can use Bitcoin as a legal tender.
World-leading tech companies specializing in cryptocurrency will also be eyeing up the switch as the Central American country looks to establish itself on the world stage. He has enormous approval ratings and has essentially the entrenched and systemic gang activity that made San Salvador one of the world’s most dangerous cities just eight years ago.
Crypto Gaming and El Salvador’s Economy
Although America is slowly warming to the idea that digital casinos can provide a propitious tax base, allowing it on a widespread basis is a slowly turning cog, and many States still outlaw gambling. However, we can’t say the same for El Salvador.
Foreign-owned casino websites are allowed to operate in the forward-thinking Central American country. Therefore, El Salvadorians can easily play crypto blackjack games with zero issues. They can withdraw any possible winnings directly to their Bitcoin wallet. If cryptocurrency gambling becomes a big market almost anywhere, you’d think it’ll happen in El Salvador.
Globally, crypto gambling is still a relatively small market compared to the colossus of the digital gaming sector. However, at the minute, some gamblers prefer crypto gambling as they can connect their wallet immediately and don’t have to provide swathes of identifiable, personal financial information.
How Would Crypto Benefit?
This isn’t just a tax aimed at AI. Plenty of the cryptocurrency industry’s computer programming and design jobs fall into the bracket of this latest El Salvador legislation. Moreover, it could result in a scenario where both the tech and crypto industry join forces to accelerate innovation in either sector.
If multi-billion-dollar tech companies start using El Salvador as their base, this is also an incredibly bullish scenario for Bitcoin, for obvious reasons. With talks of multi-billion-dollar companies being forced out of the United States, such as Ripple, and with talks of them looking to set up a new international base if they lose their massive case versus the SEC, Bukele will be hoping that Ripple CEO Brad Garlinghouse will be earmarking his country as a potential location.
With colossal projections from some of the world’s leading financial institutions such as Blackrock, who are reported to have thousands of Bitcoin, Bukele’s administration could be leading El Salvador’s charge as one of the world’s biggest technology innovators over the next decade.
At the minute, the idea of El Salvador becoming the new California might be farfetched, and there are plenty of other variables to consider. However, the fact they have emerged as a genuine challenger is an exciting prospect. Furthermore, suppose more countries begin to bring in favorable Bitcoin legislation. In that case, El Salvador has already set itself ahead in that race by legalizing it back in June 2021, and it could have positioned itself in a fantastic position globally.
The Bottom Line
America has such a grip on the global technology sector that it would take a humungous shift to push the big firms away. Big tech companies such as Google, Meta, and Alphabet have had their primary basis on the West Coast of America for decades, with tens of thousands of employees calling it their home for generations.
The likelihood of any of them deciding to move is highly unlikely. A more credible scenario would be a situation whereby they set up a smaller base and test out how easy, suitable or practical it would be to conduct business and then slowly move their operations over piece by piece.
If companies that bring in tens of billions of dollars worth of tax every year started to shut up shops in America, it would be a different question. Then, of course, they would bring incentives themselves to bid them stay, but things could get very interesting, and it certainly one piece of cryptocurrency and technology news to keep an eye on over the next few months.