Is it the future of the financial market or the biggest blunder of 21st century?
This is probably the biggest turning point for Bitcoin, the world’s largest cryptocurrency. The President of El Salvador, Nayib Bukele has announced that the nation is accepting BTC as a legitimate national currency. Ahead of the breaking news, President Bukele took to Twitter to announce that country has bought 400 Bitcoins that amount for $20 million in market valuation.
- El Salvador adopts Bitcoin as a legal national currency, making it the first nation to do so.
- President Bukele said that the nation bought 400 Bitcoins and plans to buy more.
- Bitcoin prices rally strong after the announcement.
- El Salvador government formulating $150 million fund for conversion of USD to Bitcoins.
Where Central Banks throughout the world were giving Bitcoin a hard time by launching crackdowns and annuling the practicality of the cryptocurrency, El Salvador rubbed BTC’s glory on their faces by making it a legal tender for all public and private debts.
So how does it work and what does Bitcoin as a legitimate national currency mean? In the simplest terms, the legislators of El Salvador have outsourced the nation’s monetary policy to a decentralized computer networks that will be governed by a fixed set of rules. The landmark move in the history of money is being witnessed as the first step towards liberation from the political cuffs.
Now that the episode of nationalization of Bitcoin seems to have been kicked-off, there are plenty of questions that come to mind. What does it mean for economy? Its Bitcoin eligible to be a legitimate currency? How will it be regulated? And so on.
In order to answer these questions, one needs to begin with understanding why governments of the world dislike and distrust Bitcoin. Let’s find out.
WHY DO GOVERNMENTS AND BANKS DISAPPROVE BITCOIN?
The reason why governments disapprove Bitcoin lies in its definition. BTC is a peer-to-peer transaction network powered by its users in a decentralized fashion, eliminating any central authority or middleman in between. Since there isn’t any central authority involved there, lawmakers around the world annul its practical acceptance.
Fiat currencies are backed by the trust and assurance that comes directly from governments. As for cryptocurrency, none of the administrative body takes any responsibility.
Additionally, acceptance of Bitcoin as a currency is a grave threat to the entire concept of banking industry. BTC are mined by the skilled miners who solve complex algorithms and win coins as reward. They do not require any intermediaries like banks.
This not only wipes off the regulations and check mechanism in the society, you loose the chance to earn interests, millions of jobs will disappear, and the loss of tax revenues for the economies will be huge.
The untraceable financial transactions that facilitate crimes like prostitution, drug trafficking, money laundering, tax evasion, terrorism and more, would become a permanent threat to society.
WAS BITCOIN EVER CRAFTED TO BE A LEGITIMATE CURRENCY?
It is highly unlikely that Satoshi Nakamoto had any intentions of Bitcoin other than becoming a digital gold. The primary purposes that BTC was predicted to serve were to store wealth, freedom of making money outside the regulations of administrative bodies and banks and reduce the cost of international transactions as soon as possible.
However, the cryptocurrency is clearly walking on the path of becoming a national currency. It has already fulfilled the defined goals of its founder, however, becoming national currency does not mean that it has failed.
Countries that have a weak financial back with almost negligible currencies are most likely to adopt BTC as national currency. These are the countries who have abandoned their national currency to adopt USD. Some examples of the same are El Salavador, who already did it, and Panama, Ecuador and Palau, who might soon follow the lead.
This also spells the possibility that if ever USD collapses, Bitcoin would be the resort of such countries.
However, high-income economies like Russia, US, UK and others are a far cry from crypto-led economies. Strong nationalism and financial sovereignty will never lead these nations on the path of adopting Bitcoin.
BITCOIN AS A RESERVE CURRENCY
El Salvador as already announced that it has bought 400 BTC and plans to increase the count. The possibility of Bitcoin turning into a reserve currency like USD and gold isn’t very distant now. Additionally, Sovereign Wealth Funds not only hold currencies and gold but also commodities like petrol.
Bitcoin has proven its worth in the market over and over again. If any economy still choses to not store BTC in its reserve, they may turn out to be losers given that the world is on the path to legitimize the cryptocurrency.
A BIG TEST FOR BITCOIN
El Salvador is the first country in the world that has adopted Bitcoin as a legal tender, ever since its inception 12 years back. The world is watching this 21st century’s biggest money experiment unfolding in the Central American nation.
The moment can be a game changer for cryptocurrency. Either Bitcoin can turn into a huge success and other nations with weak national currencies can join the league to adopt BTC as national currency. Or it can become the biggest blunder of 21st century.
The dollar is still to remain the national currency of El Salvador for merchants who are not technically sound and for public accounting purposes. These two groups are exempt from the law. It is not just a test for Bitcoin but President Bukele himself as the 70% of the country’s population is reluctant to accept the law despite his impressive 80% approval rating.