Bitcoin in El Salvador Explained: El Salvador Approves Bitcoin as Legal Tender
In this video, the Anton Golub, the CEO and Co-Founder of Flovtec explains Bitcoin Beach. El Salvador has already adopted Bitcoin as legal tender. So which country is going to be the next one?
[Transcript of Video]
Today we are going to talk about El Salvador becoming the first country in the world, to propose bitcoin becoming a legal tender.
Now, just recently, at the biggest Bitcoin conference, in the United States in Miami, the president of El Salvador has announced that he will propose a bill that will make Bitcoin a legal tender in his country, making El Salvador, the first country globally that will propose Bitcoin being a legal tender.
Now just to explain a little bit is that, being a legal tender means, that we could use Bitcoin actually as a means of payment to extinguish debt. So, for instance, if we took out a certain loan, or we have certain debt, in El Salvador, we could actually use bitcoin to make that repayment. Now, while this has been a very exciting news, and it was transmitted globally as the first country ever to propose that, the actual impact of the news globally, at the moment is not going to be very great.
Now, in order for El Salvador’s action to make a big impact, it needs to actually have a very strong network effect. Meaning that, having El Salvador accepting Bitcoin as a legal tender, would actually influence or motivate a lot of other countries around the globe to also accept Bitcoin as a legal tender. Now, due to the fact that El Salvador is actually a very small country, it doesn’t do a lot of international trades, the immediate impact around the globe is not going to be very great.
On the other side, when it comes to El Salvador itself, the impact could actually be very great. El Salvador is a country with still very much a cash-based society. And most of the society doesn’t even have simple additional means of payment. So, as an example of that, for instance, a company called Stripe just recently launched an app that will enable people in EL Salvador to make payments in bitcoins and have their own wallets that will support Bitcoin and bitcoin payments.
Even though this is a very exciting news for El Salvador and the world globally, we have to ask ourselves, can bitcoin actually become a legal tender globally and can it become a means of payment globally. Now, even though Bitcoin originally was envisioned as a peer-to-peer electronic payment network, due to the fact that the blockchain of bitcoin is quite slow in processing all those payments and all those transactions, it is not highly likely that Bitcoin will become globally a legal tender or a means of payment. What it is more likely is that Bitcoin becomes one of the world’s reserve assets.
So, for instance, a reserve asset can be gold, or even a currency like the Dollar or Chinese Yuan. So, in the context of what we have just said, its more likely that one day Bitcoin will become a reserved asset in central banks and governments around the globe will have Bitcoin on their balance sheet as one of the reserve assets.
So, I hope you learned something interesting, that El Salvador is the world’s first country that proposed as to introduce Bitcoin as a legal tender and potentially as a means of payment but going forward, in the future, its more likely that Bitcoin will become one of the world’s reserve assets.
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