El Salvador first, who’s next?
Bitcoin officially becomes legal tender
El Salvador became the first country in the world to officially adopt Bitcoin as legal tender. The Bitcoin law was approved with a supermajority in the Salvadoran congress.
This is a very historic moment in the 13years of Bitcoin existence and will serve as a fascinating test case for the global adoption of the digital currency. This initiative by El Salvador is an attempt to boost foreign investment, create jobs and bring Bitcoin whales.
Latin America has long been considered as a great place for Bitcoin adoption, countries such as Venezuela experiencing hyperinflation, Argentina going through debt crises, Mexico, Colombia, and others having different forms of economic crises. From a Bitcoiners’ perspective El Salvador, has 70% of the population without bank accounts and transfer of remittances from abroad accounts for nearly 30% of GDP, bitcoin is a more efficient means of transfer, far better than companies such as Western Union.
Taking a look at the general Latin American region, Bitcoin will have 2 major use cases;
Data estimates that Latin American countries received nearly $97B from family members and others, for most of the countries, these inflows represent large portions of their GDPs, the painful part is most of these remittances have outrageous fees, in most cases fees account for 10–20% of each transfer, with extremely low transfer fees compared to the western unions of the world, the fast transfers due to the direct p2p nature, Bitcoin looks set to disrupt the industry. Countries adopting bitcoin will only enhance and make the disruption occur faster.
Years of poor governance, civil wars, and badly managed economies, countries including El Salvador have to use the US Dollar as a currency and for savings (SoV), the challenge in doing this is the difficulty in accessing the US Dollar by the poor and middle class, this results in the growth of shadow markets and the counterfeit currencies. One main critic of Bitcoin is its volatility, ask people in Venezuela undergoing hyperinflation which currency they’d prefer, their hyper-inflated state fiat currency or Bitcoin. Most will go for Bitcoin
The decision by the El Salvadoran Congress has let the genie out of the bottle, I believe this decision will face some criticisms and pushbacks from International financial organizations such as the IMF, BIS, etc
I expect several other Latin American countries such as Paraguay, Panama, Brazil, Nicaragua, Mexico, Argentina, and others to follow this decision and the true immediate impact of this decision will only be known in 3–5 years.
I’m Mawusi, currently studying a Masters Degree in Energy Management at the ESCP Business School, London campus. I’ve been in the digital-asset industry since 2017. I am very focused on early-stage Investments and share my opinions on happenings in the Industry.