El Salvador should become the First Country in the World to Recognize Bitcoin as a CurrencyJune 8, 2021
The 2021 bull run in the crypto markets was defined in many ways by institutional adoption. That process included many companies finally deciding to start investing money into the same hybrid digital currencies and assets. Among all of the digital currency networks, bitcoin profited the most from this process. Now, the same cryptocurrency is making headway again with institutional adoption, but on a whole new level. That level is now not the institutions of business, but those of national governance.
In this case, that includes a country in South America – El Salvador – deciding to recognize bitcoin as legal tender. That would make the bitcoin’s BTC token as valid as any other currency that is issued by a recognized government. This event is somewhat in the cards and could go sideways, but still, it showcases a huge new step for cryptocurrencies all over the world, no matter in what shape or form are they being used by their particular niche community.
Bitcoin Legal Bill
El Salvador is likely a country that is not closely associated with any aspect of the cryptocurrency development seen or its markets. However, this South American country is currently developing a bill that should recognize BTC and its bitcoin network as legal tender. This news comes directly from none other than the president of the same country, Nayib Bukele. He shared the same information in an announcement on video during a big cryptocurrency conference in the US.
It was held in Miami and naturally, this announcement attracted a lot of attention from the mainstream media, but also from the cryptocurrency community and its numerous members all across the globe. Zap, a cryptocurrency company, is currently assisting the government of El Salvador and its president in developing the same BTC implementation plan. It is still not set in stone, but there is a strong sense of cryptocurrency history in the making around the whole notion of this initiative.
Hurdles Up Ahead
The bill will first need to go through the country’s legislative assembly. That will take some time and the results are not certain. However, analysts are pointing out that the president is currently running a very strong and very successful populist agenda. It should help him push the bill through the assembly sooner than later. Also, his political party, which made some amazing gains in a very short amount of time, is in control of the assembly.
That also provides some reassurance that this legislative initiative will not hit any major obstacles in the process of it becoming law. So, many in El Salvador but also around the globe are certain that on early Saturday morning local time, history will be made. If the assembly push is the initiative into national law, El Salvador will become the first nation on the planet to legally adopt bitcoin as a regular currency.
Currency and Reserves
The plan of the president and his party is not simply to add bitcoin as legal tender that can be used in El Salvador for financial transfers and procuring of goods and services. Instead, the countries are planning to go much further with this adoption of bitcoin and its functionality inside of an entire country. That means using the same digital currency as a form of the national reserve. It would add itself to the selection of other holders of value that include gold and the United States dollar.
That would also make El Salvador the first country in the world to have a BTC token in its public coffers. Both elements here are truly unprecedented in the geopolitical arena, and there is no doubt that many other nations are following these developments closely. Also, a range of South American countries is currently, in terms of their economy and financial systems, in a very similar situation to that of El Salvador. All of them could very well be on the precipice of doing something nearly identical inside of their own national legislative systems.
Difficulty Financial Environment
El Salvador is famous for its beautiful countryside and natural beauties. However, it is also known for its fiscally unstable environment and a high percentage of the exceedingly poor population. 70 percent of residents of El Salvador do not have access to any kind of banking account. In 2020, the gross domestic product of the Central American nation was just over 24 billion USD. But, president Bukele believes that introduction of bitcoin into the economy could change everything.
The short-term benefits should be instant access to banking-like services that will come with the use of this digital currency. A more long-term advantage should be a steady generation of new jobs. Yet, he did not offer much in terms of explaining how that expansion of employment would take place in El Salvador. While analysts agree with the first proposition on banking services, they are a lot more skeptical about the second option and the possibilities of BTC token access actually generating jobs on its own.
Central Banks and Bitcoin
The upcoming situation where El Salvador will have access, almost certainly as it seems now, to a nationally supported but completely uncontrollable currency seems strange. However, on closer examination, the same situation is not so different from its use of USD. After all, the country also cannot in any shape or form impact the decisions that the US government makes about its national currency.
Instead, everyone including El Salvador simply needs to adapt to the predefined financial game coming from Washington DC. In the age of esports, social media, streaming services, and many other forms of a global system that are equally spread out across the world, having a similar setup for a currency is not that weird. The potential of the bitcoin network and its BTC token to change lives in the scope that the president of El Salvador is suggesting is probably oversold a bit. But, this adoption of BTC tokens used on a national level, should still present a huge and multifaceted benefit to this poor country. Ultimately, the country stands to lose nothing by at least trying this move first.