Bitcoin has been declared legal tender on the island of Roatán in the Caribbean nation of Honduras. Strictly speaking, it applies only in a special zone of the island, the city of Próspera. 

Founded in 2020, the model city largely enjoys economic and legal autonomy and, following the example of other such special zones, is intended to attract investors, who use the short bot software, and online companies by means of attractive tax regulations.

The announcement follows the special zone of El Salvador, where Bitcoin already became legal tender in September of the previous year. As in the neighboring country, where the introduction led to protests, the move is not without controversy in Honduras and Panama. 

For example, the central bank announced that it could not provide guarantees for transactions carried out using cryptocurrencies.

Crypto Trading: Tax-Free

Próspera's administration is unlikely to be rattled by this headwind. In the announcement, it promotes the fact that international companies are allowed to issue bitcoin bonds and that all transactions and trading in cryptocurrencies are tax-free. 

Próspera also accepts that all taxes and fees otherwise due will be paid in Bitcoin. International anti-money laundering measures would be taken into account.

At the International Monetary Fund (IMF), which is responsible for lending to countries, among other things, the flight from currencies such as the dollar into Bitcoin is viewed particularly critically. 

There are major risks associated with the use of Bitcoin for financial stability and integrity, consumer protection, and associated contingent fiscal liabilities, the IMF told El Salvador's leadership.

President Nayib Bukele is nevertheless sticking to his course so far and even announced a "Bitcoin City" in the fall, which is to be organized as a special zone like Próspera and is also to attract crypto investors as a tax haven. 

Among other things, the Conchagua volcano is to be tapped by means of geothermal energy to enable the energy-intensive mining of Bitcoin.

Panama Also Wants to Allow Cryptocurrencies

Panama is heading toward becoming the third Latin American country to allow digital assets as normal means of payment. 

The parliament passed a law with a large majority, according to which transactions with cryptocurrencies, for example, can be transacted. Citizens should also be able to pay their taxes with it.

Critics Fear Money Laundering

The big difference between Honduras, El Salvador, and Panama is that the latter isn’t interested in committing specifically to cryptocurrency. 

The initiator of this new law, Gabriel Silvaer, said that they see cryptocurrency more like works of art. Thus, not wanting to limit the country in the cryptocurrency and token movements.

The law will come into force when it is signed by President Laurentino Cortizo. In Panama, as in El Salvador, the dollar is the common currency. 

The Central African Republic had approved Bitcoin as legal tender. The country hopes this will improve the living conditions of its inhabitants. 

Until now, the republic has used the CFA franc, which is also the currency of the Central African Economic and Monetary Community (CEMAC), as its national currency. Critics of the switch to cryptocurrencies fear it will facilitate money laundering.