Bitcoin could be used as legal tender in three more countries as early as in 2022, following bullish predictions by the President of El Salvador, whose country adopted the cryptocurrency in September, alongside the US dollar.
To his 3.2 million followers, Nayib Bukele tweeted a series of predictions about Bitcoin, including “2 more countries will adopt it as legal tender.” He also said that the cryptocurrency will hit $100,000 this year.
“I’m confident that the young, maverick President Bukele, is correct about other countries adopting Bitcoin as legal tender in 2022,” said Nigel Green of deVere Group, one of the world’s leading independent financial advisory and fintech organisations.
“But I would go further and say it’s likely three more nations will follow El Salvador’s pioneering, future-focused lead into the digital age.”
Green explained that low-income countries have long suffered because their currencies are weak and extremely vulnerable to market changes, and that triggers rampant inflation.
“This is why most developing countries become reliant upon major ‘first-world’ currencies, such as the U.S. dollar, to complete transactions.
“However, reliance on another country’s currency also comes with its own set of often very costly problems. A stronger U.S. dollar, for example, will weigh on emerging-market economic prospects, since developing countries have taken on so much dollar-denominated debt in the past decades.”
The deVere boss added that by adopting cryptocurrency as legal tender these countries immediately have a currency that isn’t influenced by market conditions within their own economy, nor directly from just another country’s economy.
Global impact
“Bitcoin operates on a global scale and therefore is impacted by wider, global economic changes.”
In addition, cryptocurrencies could also help “bolster financial inclusion for individuals and businesses” in developing countries as they “can circumnavigate the biases” of traditional banks and other financial services providers, Green said.
Following President Bukele’s bold tweet, his followers posted opinions about which nations they believe would be likely to do so. These included Tonga, Turkey and Bolivia, to name a few.
Due to their similar reliance on remittances, amongst other factors, other countries, including Panama, Paraguay, Guatemala and Honduras, could also adopt Bitcoin, the deVere CEO asserted.
“Just after El Salvador’s adoption back in September, Panama announced a bill to make the cryptocurrency legal tender in the country. Also, Congressman Gabriel Silva tweeted that this could create jobs in Panama and lure investment from other nations.
“A Paraguayan bill moving to regulate the trading and mining of Bitcoin and cryptocurrencies in the country passed the Senate last month. Is this the first step to making Bitcoin legal tender?”
Different approach
The central banks of Honduras and Guatemala are both eying digital currencies too, according to officials, but they are – for now – taking a different approach.
“They’re currently studying central bank digital currencies (CBDC). This demonstrates, again, that they too are confident that the future of money is digital.
“However, I think they will ultimately embrace an existing cryptocurrency as a legal tender, as El Salvador has done,” said Green.
“President Bukele is right. Other countries will indeed follow El Salvador’s example and make Bitcoin legal tender in 2022.
“How many remains unclear, of course. But when it happens, it will be a snowball effect.”
