Bitcoin has been widely accepted as an asset class, but it was yet to be classified as legal tender by any country before El Salvador’s President Nayib Bukele made the announcement this week at the Bitcoin 2021 conference in Miami.
The move was much lauded, not only by the attendees of the event, including BitBull Capital, CEO, Joe DiPasquale, but by media outlets around the world. It is a significant step, even if its impact is likely to be small on the grand scale of global economics.
Will it start a new trend where world governments will want to consider Bitcoin more seriously? Paraguay, another country considering BTC adoption may agree, but it is too soon to make such an assessment. What it will do, however, is give Bitcoin a testing ground to perform as a legally acceptable monetary medium for settling debts.
Up until now, BTC has been used more as a store of value and an alternative investment instead of a medium of exchange. In a year or so, perhaps usage data from El Salvador could shed more light onto Bitcoin’s public acceptability and ease of use.
Meanwhile, what this move does tell us is that smaller economies are actively seeking ways to generate wealth, be it in the form of taxes, remittances or investments. Bitcoin and digital currencies as a whole fit into this narrative for most, and present untapped opportunities to boost economic growth and provide both governments and citizens ways to benefit from this upcoming paradigm shift.
Countries where access to financial services is low, such as El Salvador, stand to benefit the most from crypto adoption and increasing inclusion for the masses. Once these countries adopt crypto and are able to show the benefits of said adoption, we can expect bigger economies to start experimenting with crypto assets as well.
For now, even if El Salvador’s adoption announcement ends up being a drop in the ocean, it stands as a big first for Bitcoin.