Bitcoin officially became legal tender in El Salvador on the 7th of September 2021, crowing it as the first country to adopt the currency. A few minutes before the clock struck midnight on the 7th, El Salvador’s populist president, Nayib Bukele tweeted, “In 3 minutes we make history”, and it sure did….with a whirlwind of excitement and protests! So what does this move mean for a developing country like El Salvador and are other countries bound to follow suit? Keep reading to find out…
Why is El Salvador Adopting Bitcoin as Legal Tender?
El Salvador’s move to adopt Bitcoin as legal tender has turned the country into a ‘National experiment’. While seen as progressive by some has also been met with pessimism by others. However, the Salvadoran president sees Bitcoin as a panacea to include the unbanked into the formal economy – that’s approximately 70% of unbanked Salvadorans.
The president also expects this move to make it cheaper and quicker for citizens to receive remittances from abroad – spurring larger and higher volume transactions.
But it can’t be all sunshine and rainbows for the crypto country, so what’s the catch?
Here are the pros and cons of El Salvador’s adoption of Bitcoin as legal tender:
Will other emerging economies follow?
Vietnam has the highest level of crypto adoption in the world. Sub-Saharan Africa had the second most P2P bitcoin trading in the world in the last 30 days. A common theme that ties these regions together is that they are emerging markets.
Cryptocurrencies are an attractive proposition for emerging markets and are quite frankly fertile grounds for digital currencies because their own fail to do the job! Some of the emerging world’s national currencies fall short of being a store of value, a means of exchange and a unit of account. Unpredictable inflation, clunky financial systems, fluctuating exchange rates and a general lack of certainty has made these currencies lose their shine.
If the El Salvador experiment works, it could be possible to see other emerging countries jump on the Bitcoin bandwagon too.
- El Salvador is the first country in the world to adopt Bitcoin as legal tender, and nations across the globe can’t wait to see how this experiment unfolds.
- The adoption of Bitcoin aims to include the unbanked and increase remittances, but skeptics see the risk, volatility and lack of regulation as a threat.
- In advanced economies, crypto is viewed with suspicion, but in emerging markets crypto is seen as a savior of financial instability.
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