invezz.com
“History!” tweeted El Salvador’s President Nayib Bukele on June 9th, before changing his profile picture to one with photoshopped laser beams shooting out of his eyes.
The somewhat surreal update from a world leader was a response to El Salvador becoming the first country in the world to introduce a law that recognises Bitcoin, the world’s most popular (and expensive) cryptocurrency as legal tender.
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The text of the law states that “every economic agent must accept Bitcoin as payment when offered to him by whoever acquires a good or service,” though this excludes anyone without “access to the technologies that will allow them to carry out transactions” – which is a majority of the population. Taxes may be paid in Bitcoin, and any debts previously owed in US dollars, El Salvador’s primary currency, may now be paid in Bitcoin. Salvadoreans may use any digital wallet, including a new ‘official’, government-sanctioned one.
It’s a big deal for the country, its people and financial systems around the world. Forbes comments that it could:
“transform El Salvador into one of the world’s most important financial centers, and … affect the way people around the globe use digital currencies.”
A key question will be whether other countries follow suit, and many analysts predict governments will be watching El Salvador closely to see if the move fulfills its aims, which include allowing remittance transactions without third-party fees, adding an estimated $1 billion to the economy; enabling greater rates of smartphone transactions and financial inclusion for the unbanked; and attracting investment from cryptocurrency businesses and others.
So which countries are likely to accept Bitcoin as legal tender next?
Contenders could include nearby Panama and Paraguay, which are set to consider bills aims at supporting cryptocurrencies and crypto-businesses; and Latin American nations Mexico, Colombia, Argentina and Brazil, where crypto-enthusiasm is high and economies struggle with issues of inflation and currency devaluations.
While not any time soon, they could also include Nigeria and the Philippines, which have the first and third highest number of crypto-users as a percentage of their populations; Ukraine, which has made recent moves to bring cryptocurrencies into its legal system; and Japan, which has strong regulatory oversight of its crypto industry and already counts cryptocurrencies as legal property.
Lead editor at Invezz, Jayson Derrick says this:
El Salvador’s move to recognize bitcoin as a legal tender is certainly historic and early supporters are taking a victory lap. El Salvador is a very poor country but it will certainly attract the attention of leaders across the world who will be looking very closely for signs of success.
If El Salvador is able to show the world improving economic conditions for its people, other developing and second-world economies could rush to follow the Latin American country’s lead.
Derrick continues:
“Encouraging developments in the move towards greater adoption of bitcoin aren’t limited to poorer countries. India, a G20 member with a $10 trillion economy, is reportedly close to classifying bitcoin as an asset class”.
It is important to keep in mind that bitcoin bulls are holding on to their coins for many decades. In the meantime, there will certainly be spikes in volatility but the longer-term outlook for bitcoin continues to improve as each year passes.