El Salvador was declared the first country in the world to give the go-ahead to Bitcoin to be the first legal tender cryptocurrency in a country. This has caused several countries to consider adopting cryptocurrencies or consequently their own digital currencies in different areas.
What important developments are being implemented in the countries?
The most recent examples to highlight in terms of countries that have considered applying changes and directly introducing both digital currencies and cryptocurrencies are the following:
In Brazil, the mayor of Rio de Janeiro, Eduardo Paes rewards taxpayers who make tax payments in cryptocurrencies since he intends to invest in them 1% of the State treasury.
Paraguay, another country with neo-monetary intentions but nothing applied at the moment, is where its president Carlos Rejala published a tweet in which he claimed that if he was in office in 2023 he would adopt Bitcoin as legal tender.
The same with Panama, which has already become the point of the day in the national assemblies.
In addition, there is evidence that Uruguay, the eleventh country in South America to publicly promote the adoption of cryptocurrencies, installs the first ATM in Punta del Este City.
In the other hemisphere, China, has its own digital currency or CBDC (Central Bank Digital Currency) issued by the central bank of the Chinese government, which comes to be a digital representation of money regulated by a state. The same case occurs in India which seeks to boost its digital economy, so they include the creation of a digital rupee that facilitates the management of the currency.
Little by little, we will see news of this kind, in which countries stumble, but it is a matter of time before they straighten towards a possibly more profitable direction than traditional monetary systems.
These are just a few examples from the not-so-distant future. But are all countries prepared to move at this pace and endure these drastic changes? Or, rather, are all countries interested in adopting cryptocurrencies or digital currencies as legal tender?
It should be explained that El Salvador has adopted Bitcoin as an ongoing currency to deal with the country’s economic problems, such as making money transfers abroad cheaper since they account for 1/4 of the country’s GDP.
As for Europe, the ECB wants to work on a regulated and official prototype in 2023. This gives rise to the fact that if everything goes as expected, the currency will be regulated and will be official in 2025.
The United States intends to strengthen its leadership in the global financial system and at the technological frontier will regulate cryptocurrencies and evaluate the creation of a digital dollar. At the same time, it wants to address “consumer protection, financial stability, national security and climate risk.”
But not all are advantages, bitcoin or cryptocurrencies, in general, have shown us on thousands of occasions that one day they are hot and another touching minimum, so this great volatility carries too high a risk for the companies we know. This makes it unlikely on a large scale that countries, however, developed they are, will adopt a cryptocurrency if no central bank backs them.
Spain and its citizens will adopt the new digital payment methods, but it will not be as a substitute mode but as a complement to cash. So all will be advantages in terms of access, at no cost, to a simple, universally accepted, reliable and risk-free means of payment.
Therefore, countries that are thinking about adopting cryptocurrencies as legal tender should know that they expose themselves to great risk due to volatility but that it can translate into great profits. In addition, it should be known that the Blockchain, the infrastructure that supports cryptocurrencies, is a decentralized registry so there is no more secure and transparent technology in the world since all movements are recorded and are impossible to eliminate.
In this way we would say goodbye to traditional banks and their unfair intermediaries for the simple process of a transaction. In addition to the fact that the cryptocurrency market does not sleep, it is always open, so inflation would lose weight and investors would gain facilities.
In any case, you also have to be realistic and keep in mind that this is a transition that requires a lot of time and effort. Volatility can lead to large profits, but also large losses and have not yet been shown to be a good long-term investment.