What factors often drive a country’s acceptance of Bitcoin as legal tender? | The Financial Express

What factors often drive a country’s acceptance of Bitcoin as legal tender?

The Central African Republic is the second country to accept Bitcoin as legal money (CAR).

What factors often drive a country’s acceptance of Bitcoin as legal tender?
Some countries have more fundamental challenges that a digital counterpart of a fiat currency may not be able to address.

Regardless, central banks are experimenting with digital currencies. There are some countries that have more fundamental issues that a digital counterpart of a fiat currency may not be able to fix, as reported by Cointelegraph.

For example, countries such as Argentina and Venezuela have suffered from hyperinflation for years and may benefit from a currency that draws its value from sources other than their own economies. Remittances also contribute significantly to the GDP of nations such as El Salvador, Panama, Guatemala, and Honduras. This opens the door to a form of value exchange that is not bound by national borders. Remittances, for example, will account for 24.07% of El Salvador’s GDP in 2020.

Central banks, on the other hand, are experimenting with digital currencies. Some countries have more fundamental challenges that a digital counterpart of a fiat currency may not be able to address. Countries such as Argentina and Venezuela, for example, have experienced years of hyperinflation and may benefit from a currency whose value is derived from sources outside of their own economies. Remittances also considerably contribute to the GDP of countries such as El Salvador, Panama, Guatemala, and Honduras. This allows for a sort of value exchange that is not limited by national borders. In 2020, remittances will account for 24.07% of El Salvador’s GDP, Cointelegraph noted.

It should also be highlighted that regimes that make Bitcoin legal tender claim to be providing financial inclusion to their people. However, financial inclusion is frequently preceded by mobile and internet penetration. A digital currency will not be able to tackle the challenge of financial inclusion on its own without the support of digital infrastructure. El Salvador is the first country to legalise Bitcoin. Aside from the aforementioned macroeconomic considerations, the country had a leader eager to experiment with bitcoin. He has since become a devoted supporter of cryptocurrency.

The Central African Republic is the second country to accept Bitcoin as legal money (CAR). The Central African Republic has a $2.3 billion economy and is rich in natural resources such as gold and diamonds. However, financial inclusion is minimal, and they rely on remittances. Apart from accepting Bitcoin, the country recently disclosed that 20% of its treasury will be held in Sango Coin (SANGO), a digital currency that will reflect the state of the country’s natural resources.

(With insights from Cointelegraph)

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