Has El Salvador’s Bitcoin Legal Tender Stance Impacted the Crypto Adoption?

El Salvador is a country in Central America that borders the Pacific Ocean to the north. It also borders Guatemala to the southeast and Honduras to the southwest. It has recently adopted Bitcoin as its legal tender. BTC is now a lawful means of payment in the country. For some time now, many countries have turned their attention to the “future of finance.” This act has triggered numerous reactions worldwide. Also, many countries take sides between backing and condemning crypto adoption.  

Why did Salvador make Bitcoin its legal tender?

On 9th June 2021, El Salvador passed a unique bill. 62 out of 84 congress members voted in favor of making Bitcoin a legal tender in the country. President Nayib Bukele backed this motion. He saw the adoption of BTC would provide his citizens with investment incentives, financial inclusion, and jobs. The Salvadoran government will issue permanent residence to global citizens who will invest their BTC in the country.As an incentive for signing up for government-backed wallets, Salvador will give its citizens $30. About 70% of Salvadorians do not have access to banking services. Therefore the use of BTC as a legal tender helps expand financial inclusion. However, the impact of p2p transactions on their economy is not clear.

Implications of Legalizing Bitcoin to Salvador’s economy 

In June 2021, IMF Director Gerry Rice stated that Salvador’s move posed untold financial, macroeconomic, and legal issues. These issues would require careful analysis. The IMF and Salvador are holding talks to iron them out. Among the concerns that the country will have to deal with are: 

Effect on International Trade

The US is Salvador’s largest trading partner, with 2019 exports into Salvador reaching $3.4B while the exports to the US were $2.5 B. Since Salvador ditched its legal tender in 2001 and adopted the US dollar, their business relations have flourished. Using different currencies again could affect this trade relation since their exchange rates are different.

The Worldwide Crypto Adoption Regulations Review

Since some countries like China and Russia have warned against involvement in cryptos on their land. Relations between them and Salvador will be affected because these countries will tend to distance themselves from cryptos.

Operations of a Central Bank Without Monetary Control

Bitcoin source code allows it to have only 21 million tokens. It remains a mystery how the central bank of Salvador will function without total control over their legal tender.

Effects of Unstable Inflation and Exchange Rates on the Economy

Bitcoin is highly volatile. This feature will affect Salvador. The gas fees in the transaction of Bitcoin keep changing. As such, the transaction costs of the currency in the country will be irregular.

Effects of Legalizing Bitcoin on Crypto Adoption

Many countries are debating whether cryptocurrencies are the future of their financial systems. Most are treading carefully on that. The reason is despite their advantages, adopting cryptos raises several concerns. A day after the approval of BTC as legal tender in Salvador, its market values plummeted. Such effects are the reason why the governments of the world are not adopting cryptos.Many countries are considering the best ways to regulate crypto transactions before adopting them. Once crypto adoption begins, life will never be the same again. The following are some of the countries that have reacted to Crypto adoption lately.On 14th September 2021, US senators summoned SEC chair, Gary Gensler, to question him about the delays in SEC joining the campaign for regulation of cryptos. The Senate Banking committee invited him for a discussion to ensure that some financial rules are intact since cryptocurrencies may encourage criminal activities. However, he assured the Senate that his top regulator is working around the clock to make rules that will govern the highly volatile crypto markets. It is not the first time that the US government has tried to regulate cryptos.Since 2017, China has stood firm with its decision to oppose the use of cryptocurrencies among its citizens. The People’s Bank of China (PBOC) warned other banks against facilitating cryptocurrency-related transactions. The Chinese leaders noted that the Crypto era challenges the economic and financial order of the country.   The United Kingdom has set aside rules to follow when transacting using cryptocurrency. The UK never backed nor went against the use of cryptocurrencies. But it rolled out some rules in a bid to control crypto transactions. Japan has also reacted to adopting cryptocurrencies. It has set up a task force to oversee the analysis of crypto gains to develop a CBDC.

Which Countries have allowed the use of cryptos after Salvador’s Bitcoin Stance?

After Salvador’s BTC push, some countries have started discussions on whether to legalize the use of cryptos in their areas of jurisdiction. These countries include:

  • According to CNBC, Ukraine has also legalized Bitcoin. As per the report, the Parliament voted in favor of a bill from 2020.
  • On 17th June, Paraguayan politician, Carlos Rejala, tweeted in support of Bitcoin. He spoke about proposing a motion asking the Paraguayan lawmakers to regulate BTC.
  • Some Mexican lawmakers have also thrown their support behind Bitcoin and other cryptos. Eduardo Murat said that he was planning to promote and propose a legal framework for the operation of cryptos in Mexico.

Conclusion – Bitcoin & Crypto Adoption

Bitcoin live price
price change

To sum up all of the above, we can see that cryptocurrencies have a promising future. World leaders have seen the potential in digital currency and have decided to adopt it progressively. The governments have started by pushing for the regulation of cryptocurrencies before adopting them as legal tenders.After the regulation and study of cryptocurrencies end, the next step will be the official adoption and incorporation of cryptos into financial systems. El Salvador’s Bitcoin stance is just the beginning of the era of the adoption of cryptocurrencies. It will serve as a case study for others seeking to adopt digital currencies as their legal tender.

Stay up to date with our latest articles

More posts

Meta Unveils NFT Cross-Posting on Facebook and Instagram

In an update earlier today, global tech conglomerate Meta shared news of its latest moves surrounding digital collectibles. From September 29th, subsidiaries Facebook and Instagram will now allow users to link their virtual wallets with their accounts and also share non-fungible tokens. Users Across 100 Countries Can Access New Meta Feature  Everyone on @instagram and @facebook can now share their digital collectibles in the US, and on Instagram in the previously announced 100+ countries,” Meta announced in a tweet. https://twitter.com/MetaNewsroom/status/1575486040349245446?s=20&t=TpIDHfYcRCtVRMNrwYhWiA…

Genesis Head of Sales Steps Down a Month After CEO

The crypto lending and custody platform Genesis waved another executive goodbye on Wednesday as co-Head of Sales Matt Ballensweig stepped down.  That’s the second executive departure from Genesis after its CEO, and the next in a long list of crypto industry higher-ups this quarter.  Yet Another Departure in Crypto In a Twitter thread on Wednesday, Ballenswelg explained that he was formally leaving his post after over 5 years, and will be transitioning his responsibilities to select colleagues. In the short…

Nayib Bukele Was Right: Bank of England Resumes Money Printing

El Salvador President Nayib Bukele took a victory lap on Monday after the Bank of England’s British pound rapidly depreciated against the dollar.  The institution has since resumed quantitative easing. Its action marks a clear pivot that many in the Bitcoin community predicted central banks would be forced into months in advance. Bukele’s Callout Bukele tagged the Bank of England with a triumphant “Told you,” over Twitter, scoring over 14,000 like and 2000 retweets from his followers.  His brief comment…

Study Reveals Fossil Fuels Still Power 62% of Bitcoin Mining

Per a report from the Cambridge Center for Alternative Finance (CCAF), fossil fuels have been the primary energy source for BTC mining since the start of the year. The CCAF recently updated its Cambridge Bitcoin Electricity Consumption Index (CBECI).  Its study claims that 62% of all the energy the leading token has consumed so far consists of coal-based energy. BTC’s Energy-Intensive Mining Bitcoin employs the proof-of-work consensus mechanism to create new tokens and validate transactions on the blockchain. The PoW…

Strike Close $80 Million Funding Round to Further Expand Bitcoin Payments 

Strike – a Bitcoin payments company and digital wallet provider – has closed an $80 million funding round led by Ten31.  The funds will bolster the company’s efforts to “revolutionize payments” for the payment industry’s biggest players.  According to a press release, both Washington University in St. Louis and the University of Wyoming also partook in the raise.  The funding leader, Ten31, is a Bitcoin and lightning infrastructure provider that’s invested in numerous other Bitcoin native companies like Blockware, Swan,…

indu4.0 – The Digital Marketplace for the Manufacturing Industry

indu4.0 is a digital B2B marketplace for the manufacturing industry, aiming to make the bridge between supply and demand faster, more efficient, and cost-effective. The company behind it, Indu4.0 AG, operates from Lucerne, Switzerland. It has already succeeded in integrating numerous complex industrial products and services with a sophisticated filter system in a user-friendly platform. This indu4.0 review looks closely at one of the most ambitious projects seeking to establish a blockchain presence for the behemoth-sized manufacturing industry. Read on…

Here are the Benefits of Auditing Your Smart Contract with SolidProof

Auditing a smart contract is vital to ensure that the code functions as intended. SolidProof offers a wide range of services to help with this process. The company guarantees a sound audit process and an experienced team of auditors.  Here are the benefits of auditing a smart contract with a reputable company such as SolidProof: A wide range of services: SolidProof offers a wide range of services to help with the audit process, including code review, security analysis, and more.…

Nexo Receives Cease and Desist Order From California Regulators

The crypto lending platform Nexo has been ordered by several California securities regulators to halt its crypto yield product. The state claims that the company’s interest-bearing accounts qualify as unregistered securities that require proper disclosures and legal protections. The California Department of Financial Protection and Innovation (DFPI) announced the enforcement action on Monday. The Department said its action was part of a larger investigation of companies offering crypto interest accounts.” The DFPI has undertaken aggressive enforcement efforts against unregistered interest-bearing cryptocurrency…

Hacker Carts $1M in Another Vanity Address Breach

Amidst a rise in DeFi breaches, yet another address from Ethereum vanity wallet address generator Profanity has fallen victim to an attack. A malicious actor was able to exploit a vulnerability in the tool and make off with almost $1M worth of ETH. This comes roughly a week after DEX aggregator 1Inch spotted and highlighted the weakness in Profanity-generated addresses.  Hacker Steals 732 ETH Blockchain security company Peckshield called attention to the latest attack early on Monday. The firm published…

WMA: Bitcoin Below $19,000 while XRP Surges as the Bears Maintain Control

Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The Crypto Market ends the week at a total market capitalization of $928 billion. Bitcoin has decreased by nearly 4% this week. Ethereum lost almost 8% over the past seven days. XRP is up by nearly 29% this past week. Almost all altcoins are trading in the red, with few exceptions. The DeFi sector maintained the total value protocols (TVL) at around $27 billion. Crypto Trends…