Following the announcement of his intentions to make bitcoin a legal tender at the Bitcoin 2021 Miami conference, El Salvador’s President Nayib Bukele officially announced bitcoin as a legal tender in his country on the 7th of September 2021, making the small central American country the first to adopt bitcoin as legal tender.
President Bukele while announcing his plans to legalise bitcoin highlighted that this adoption will help boost the country’s development by making financial services more accessible in the country where over 70 percent of the population do not have bank accounts.
WHAT OTHER COUNTRIES ARE LIKELY TO ADOPT BITCOIN AS LEGAL TENDER?
As reported on Premium Times, the Central African Republic(CAR) on the 27th of April became the second country in the world and the first in Africa to adopt bitcoin as legal tender.
According to a statement by the presidency, lawmakers in the CAR parliament voted to pass a bill legalising bitcoin and other cryptocurrencies.
With the move by El Salvador and CAR, it is evident that bitcoin and other cryptocurrencies are gaining wide adoption and it won’t be long before other countries key into the trend. A few other countries have made moves with regards to adoption of bitcoin or other cryptocurrencies as legal tender.
Countries such as Ukraine, Cuba, Paraguay and Panama have either passed laws recognizing and regulating cryptocurrencies or are at the verge of doing so. The laws signify that these countries recognize cryptocurrencies and their citizens are free to use them. Having passed laws and regulations in the area of cryptocurrencies, it could be a sign that these countries would legally adopt bitcoin and cryptocurrencies in the future.
WHY OTHER COUNTRIES MAY ADOPT BITCOIN AS LEGAL TENDER
Asides being highly volatile, bitcoin will help to solve lots of problems in the area of inflation, cross border money transfer and financial inclusion. According to the Guardian, Some experts claim that governments and banks have in place monetary policies that enable them to print as much money as possible. This creates excess supply which in turn leads to devaluation of the currency leading to inflation. Bitcoin helps tackle this with a maximum supply of 21 million units, thereby driving scarcity which is an important property of legal tenders.
Also, with regards to cross border money transfer, it is cheaper and easier to send units of bitcoin than other assets such as Fiat currency or gold. With this, bitcoin has proven to be an excellent alternative for day-to-day transactions.
Adoption of bitcoin as legal tender will help drive financial inclusion by making it easy for people to access financial services with the help of blockchain infrastructure. This comes in handy especially in rural areas with little or no access to financial institutions such as banks.
While the high volatility of bitcoin may hinder it’s usability as a legal tender in major economies, countries may also choose to explore the option of stable coins such as USDT, BUSD and DAI which are designed to be non-volatile while maintaining the ease of use and scalable nature of traditional cryptocurrencies.
DETERRING FACTORS TO BITCOIN ADOPTION
It is evident that the adoption of bitcoin as legal tender will help solve lots of issues with regards to a country’s economy but it also poses a threat to the country’s already existing currency. The adoption of bitcoin or other cryptocurrencies may result in abandonment of a country’s currency and a surge in use of cryptocurrencies. This of course will negatively influence the value of the country’s native legal tender.
With the value, ease of use and inflation-resistant nature of bitcoin and other cryptocurrencies, an alternative will be launching country specific digital currencies which are known as Central bank digital currency(CBDC). These of course will be pegged to the country’s Fiat currency but are characterised by the ease of use and scalability associated with traditional cryptocurrencies.
In conclusion, lots of country’s will in the near and far future adopt bitcoin as legal tender but countries with well established financial systems such as U.S.A, Russia and the likes of them may explore the alternative of having their own Fiat currency pegged digital assets.