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This year, El Salvador became the first country in the world to legalise Bitcoin as a form of payment, according to the latest reports. Reactions in the capital San Salvador were mixed. Some hoped that the new currency would boost prosperity and financial opportunity, while others were hesitant.
Now that Bitcoin has officially been El Salvador’s legal tender, this means that citizens may now pay with it almost anyplace, companies will be required to accept it, and even taxes will be paid in Bitcoin. This initiative then has sparked many countries from Latin America to support the idea of legalising Bitcoin, which includes Paraguay, Mexico, and Panama.
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This year has been another wild journey in Bitcoin land. After a period of stagnation following the breakdown of the 2017 hype, Bitcoin prices have soared to new heights. It has been a yo-yo effect.
The news about El Salvador’s Bitcoin adoption was groundbreaking to everyone. There were no statistics until El Salvador, but this may explain the next nation’s domino to fall.
In this article, we will explore different possible country adoption methods for Bitcoins.
First, let us define legal tender to make things clearer as we further our discussion.
What is “legal tender”?
Within a specific political jurisdiction, legal tender refers to money that is legally recognised. Legal tender performs all of the economic tasks of money and a few more, such as facilitating monetary policy and currency manipulation.
The use of anything other than current legal currency as money is essentially prohibited under legal tender laws.
Here are the three adoption methods, as explained by an article from Bitcoin Magazine:
- Top-Down Adoption
El Salvador is an excellent example of this adoption method. Nayib Bukele, El Salvador’s president, gave numerous factors to use as data points in their top-down adoption: a remittance-based economy, negative migration figures, reliance on a monetary policy they do not control, and unbanked population, to name a few. Each argument is logical, and resolving each problem is beneficial to the entire country.
As countries seek to repair the holes in their monetary sinking ships or avoid the wrath of sanctions, these data points will likely be consistent for top-down methods.
- Bottom-Up Adoption
Bottom-up adoption will occur in nations with moderate to high levels of corruption, neutral migration numbers, moderate to high urban populations, active social media, and high smartphone penetration. It is the preferred approach of every free market and self-governing individual, but it may also be the most difficult to implement. Governments hesitant to accept the hybrid method are likely to avoid enacting Bitcoin legislation for political reasons. The hybrid method will be discussed further below.
Countries and governments having the most to lose in terms of economic power, geopolitical influence, and unrestrained spending budgets will be the most adamant in their opposition. Free markets will naturally choose an open, mathematically based monetary policy, but governments would almost certainly try to persuade the public that it is not in their best interests.
To combat disinformation, social media and mobile usage will be critical. The free market will converge on Bitcoin, but governments will be forced to choose between pushing for, reluctantly accepting, or combating Bitcoin acceptance. This adoption strategy might keep countries stagnant for an extended period.
- Hybrid Adoption
Higher inflation rates, an unstable monetary policy, modest smartphone penetration, active social media, and a lower GDP per capita are all possible characteristics of such a country that will use this adoption method.
A large enough public supports hybrid adoption to encourage a forward-thinking government to seize the movement and make Bitcoin law. A government may take the momentum and claim Bitcoin’s success as its own by riding the wave of acceptance early on. The free market will have already rewarded adoption, innovation, and education.
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