The ripple effects of Bitcoin legalization around the world – Crunchbase News

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By Sesie Bonsi

El Salvador has now become the first country to adopt Bitcoin as a parallel legal tender alongside the US dollar. This should hardly come as a shock since COVID-19 has sparked the proliferation of fiat digital currencies.

Although Nayib Bukele, President of El Salvador, is leading the way, politicians in other Latin American countries have also started to call for the adoption of Bitcoin, due to their reliance on the US dollar. Meanwhile, the World Bank has rejected a request by El Salvador to help with bitcoin implementation, citing concerns about the transparency and environmental impact of bitcoin mining.

So which countries are likely to implement Bitcoin next?

Chainalysis, which studies blockchain transactions, ranked Venezuela third on its Global Crypto Adoption Index. Venezuela is already using crypto as a stopgap for its economic situation, but Paraguay, Panama, Mexico and Brazil could be next. El Salvador will not be an isolated case.

Latin American countries and their politicians are considering other currencies alongside the US dollar as a reserve currency to provide liquidity and reduce risk. When COVID-19 hit, dollars held in countries’ reserves lost value, and with it, the search for an alternative currency to hedge against inflation began.

Sesie Bonsi is the founder of Bleu

Who wouldn’t want a stable economy, autonomy and liquidity that are not tied to the decisions of another country?

Due to international trade law, Bitcoin is also permitted as legal tender under all treaties of which El Salvador is a member. The other countries which are part of these treaties, and consequently the banks and financial institutions, will have to accept this currency.

Suppose you own a business in Mexico and deal with a seller in El Salvador requiring your business to pay in bitcoin; your financial institution must determine how to send the desired currency.

It is a domino effect: this movement will have repercussions on all multinationals with offices in El Salvador.

The World Bank is skeptical. But does Bitcoin have the infrastructure to become a globally accepted currency?

Elon Musks’ decision to block Tesla from accepting bitcoin as a form of payment, unless miners use 50% clean energy, has led to a new review of the environmental impact of cryptocurrencies . But El Salvador plans to set up a geothermal energy utility that would use energy derived from volcanoes, a renewable and sustainable energy resource, for bitcoin mining. This marks the start of more renewable crypto-energy projects.

And while the World Bank has publicly expressed doubts about the rise of crypto, it is creating an alternative crypto infrastructure to stay relevant. Even the Bank of England was asked to create and regulate its own cryptocurrencies in a government-backed review earlier this year.

The alternative solution that these financial institutions are considering is a central bank digital currency, or CBCD a digital form of a country’s currency. When that currency was established, we would see government unemployment benefits and social assistance paid out by the CBDC. Then the tax authorities could require most companies to pay payroll taxes with the CBDC, which would require paying CBDC employees. Business analytics firm MicroStrategy already pays its board of directors in bitcoin.

Forcing the general public to buy from banks would mean restrictions on where you can buy alternative currencies, and financial institutions could block crypto sites or third-party wallets.

Educating the public on emerging cryptocurrencies is essential. Decentralized cryptocurrencies mean that governments cannot seize the assets of a political opponent if they do not agree with the political agenda, which is why people living under authoritarian governments, using systems to assert their control, are pushing for its adoption.

But if CBDCs go mainstream, does that mean even less autonomy?

Sesie Bonsi is the Founder and CEO of Bleu, a financial technology platform focused on contactless payment experiences.

Illustration: Li-Anne Dias.

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