Implications of Embracing Bitcoin as a Legal Tender
Bitcoin, a digital currency, has the probability of entirely changing how the economy works, and it is already doing it. Institutional investors and commercial banking clients are encountering heightened attention to this monetary asset and blockchain technology, which underlies Bitcoin. The prevalence of the countries has either enabled or adopted this digital money. On the other hand, countries like El Salvador and the Central African Republic have declared this virtual money a legal currency. To get started with trading cryptos, visit the official website of bitcoin-profit.cloud
Since El Salvador adopted this virtual currency as a legal tender, there have been intense suggestions on how effective this virtual currency is to the public. This digital money has also become more attractive to individuals and countries who cannot access conventional payment systems.
Benefits of Bitcoin Legalization
When El Salvador adopted this virtual currency as a legal tender, the president, Nayib Bukele, claimed that the decision brought a lot of financial benefits to the country. In Latin America, El Salvador is one of the smallest countries with a mere population of 6.5 million, generating $27 billion in GDP annually.
In addition, for investment incentives, the government of El Salvador decided to offer permanent residence to anyone who invested at least three Bitcoins into the country. More so, these individuals were not going to pay capital gains taxes.
Nevertheless, besides creating job opportunities, El Salvador offered financial inclusion, especially to the unbanked population, which is almost 70% of the population. Also, this virtual asset uses the peer-to-peer network, ensuring everyone has equal chances to transact this digital money.
Implications of Bitcoin Legalization
This digital money adoption in El Salvador and the Central African Republic has brought a lot of economic growth to the government. However, the IMF claims that this virtual asset adoption has a lot of legal and financial macroeconomic issues that need to be analyzed carefully. Here are some of the implications of Bitcoin legalization.
International Trade
El Salvador is a small Latin American country using the US dollar as a legal tender since 2001. As a result, the US is the largest trading partner of El Salvador. Using the US dollar as a legal tender, El Salvador benefited from the ease of conducting trades between the countries. However, with Bitcoin’s legalization, there are questions on whether the US will accept this virtual currency as a means of settlement rather than the dollar.
On the other hand, the Central African Republic has close trading relations with China, the second largest import source. However, China banned this digital money operation in the country. Consequently, it will be tough for China and the Central African Republic to settle on a common ground on which form of payment to use to complete payments.
Different countries define this digital money differently, with the US claiming that Bitcoin is a digital representation that does not have legal status. On the contrary, El Salvador defines Bitcoin as a legal tender. Therefore, if countries change their definitions of Bitcoin to legal tender, it will open nations to legalize Bitcoin operations.
The Bottom Line
With Bitcoin becoming a legal tender in El Salvador, it has proved its convenience and that it is a reliable asset. As a result, this virtual currency is not only a digital asset but also a legal tender. And more countries are likely to embrace it as a payment method.
