On June 8th, 2021, El Salvador passed The Bitcoin Law - granting Bitcoin the status of legal tender.
Many speculated on what this decision would mean for El Salvador, Bitcoin, and indeed cryptocurrency in general. However, the question this article will seek to address is:
Why El Salvador?
Of all the countries in the world who could have switched to Bitcoin as legal tender - what unique factors made El Salvador the world's first country to officially recognize Bitcoin as legal tender?
Reason #1: A leader with wide reaching power
Nayib Bukele has been a controversial leader since taking power On June 1st, 2019. Proponents have argued he has helped clean up El Salvador by being hard on crime, while also helping to secure a (comparatively) high number of vaccines for his citizens during the COVID-19 pandemic. Critics have slammed his anti-abortion views, as well as his seemingly authoritarian style of leadership.
Regardless of your opinion of him, Bukele has a tremendous amount of individual power and influence over the decisions his country makes. This makes a radical idea such as adopting Bitcoin as one's legal tender much easier than a country which relies on a series of checks and balances, or partisan agreement.
Reason #2: Not a 1st world country
Many 1st world countries have the benefit of having a (relatively) stable currency. Countries like Canada, Japan, the USA and the UK may go up or down comparatively to other countries, but they can rely on their currency to remain relatively stable as an accepted medium of exchange.
However, countries who suffer from hyper-inflation - or who may potentially suffer from hyper-inflation may be more likely to adopt a cryptocurrency as legal tender to hedge against runaway inflation, or their currency losing power on the global stage. While this 'bet' may seem wise - detractors point to Bitcoin and cryptocurrency's volatility as reasons why it is actually not a wise policy.
So which country might be next?
If we take these 'ingredients' into account, countries which spring to mind include Cuba, fellow Central American neighbours Nicaragua and Guatemala, as well as Venezuela. It will remain to be seen how China's banning of Bitcoin and cryptocurrencies will affect Asian countries from adopting Bitcoin.
Please feel free to share your own predictions for which country may grant Bitcoin legal tender status as well!
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Until next time...