Bank of America, the second-largest bank in the U.S., has recently released a report that unpacks its thoughts on El Salvador’s adoption of bitcoin. The bank surprisingly identified four main benefits that the Central American nation stands to benefit from the world’s biggest cryptocurrency.
Upsides To Using Bitcoin As Legal Tender In El Salvador
This has been a year full of shocks and surprises. In the crypto world, most people would not have imagined Bank of America would be outlining advantages that a country could gain from foraying into the bitcoin market. Yet, here we are.
The bank noted that El Salvador’s decision to accept bitcoin as legal tender along with the U.S. dollar will remarkably slash the costs of remittance payments, which represent a whopping 24% of the country’s gross domestic product. The report stated, per a tweet by state-sponsored Diario El Salvador: “Using Bitcoin for remittances could potentially reduce transaction costs compared to traditional remittance channels”, adding,
“The idea is that bitcoin could be used as an intermediary for the cross-border transfer, so that dollars are converted to Bitcoin by the sender and then converted back to dollars domestically by the receiver.”
Promoting financial digitization is another benefit of adopting bitcoin. At present, over 70% of adults in El Salvador don’t have bank accounts. As such, improving access to electronic payments via Bitcoin has a “progressive touch”.
Moreover, the adoption of bitcoin gives consumers more choice. Regarding this, Bank of America notes that Salvadorans will not be obliged to use it and businesses can refuse to accept it if they don’t have the necessary technology.
Lastly, the banking giant indicated that El Salvador’s much-touted bitcoin gambit could potentially open up the nation to business with American firms and cryptocurrency miners.
The sentiments will no doubt invite cheers from the crypto community, given Bank of America had penned a report entitled, “Bitcoin’s Dirty Little Secrets” in March. In the report, the bank had argued that the only motive behind investors owning bitcoin is the expectation of future price appreciation as the crypto asset is “impractical as a store of wealth” or even payments.
The Shot Heard Round The World
El Salvador has been using the U.S. dollar as its official currency since 2001 when it ditched the colon. President Bukele rocked the world when he announced his plans to make bitcoin legal tender. His Bitcoin Law, which will be enforced starting September 7, was passed by a supermajority in the country’s legislature on June 8. El Salvador automatically became the first country to make the bellwether crypto an official currency.
Bukele’s decision to adopt bitcoin was met with both excitement and trepidation. For crypto enthusiasts, it was emblematic of mainstream adoption and more good things to come as some Latin nations as Paraguay hinted at exploring their own cryptocurrency strategies.
Meanwhile, the legislation has suffered stiff dissent from skeptics who argue that it goes against El Salvador’s constitution. The plan to implement the law was jeopardized in June when the World Bank emphatically declined the country’s request to help it adopt bitcoin, citing transparency and environmental concerns.
Moreover, JP Morgan reckons El Salvador’s BTC bet could put pressure on the bitcoin network. In the same vein, Moody’s recently downgraded the country’s rating in part because of the government’s passage of a law.
Meanwhile, close to 83% of El Salvador residents don’t want to receive their remittances in the oldest cryptocurrency, according to a recent survey.