El Salvador made history earlier this week when it became the first country in the world to recognize bitcoin as a form of legal tender. This came after Congress approved it with 62 votes, and according to El Salvador's president, this historic vote will make life easier for the country's citizens.
This demonstrates how far bitcoin has progressed as a payment method and can only bode well for the industry in the future. But, with El Salvador taking this step and other countries likely to follow, what are the long-term consequences?
Why El Salvador Chose Bitcoin
Among the many countries where bitcoin is used, including larger ones like the United States and European countries, it's worth noting that El Salvador was the first to recognize bitcoin as legal tender.
It should be noted that more than 2 million Salvadorans live outside the country, and more than $4 billion is remitted to the country each year. This accounts for 20% of the country's GDP and given that bitcoin and cryptocurrency, in general, have become a popular way to send money across borders, this would be a wise move.
What it Means
Accepting bitcoin as a form of payment in El Salvador means that bitcoin is being endorsed not just as an investment vehicle, but also as a means of payment. The majority of the narrative surrounding bitcoin revolves around bull and bear runs, as well as price dips and swings. It could be argued that the majority of people who invest in bitcoin these days are not looking to avoid the traditional payment system, but rather to make a profit.
While many people have been drawn in by the excitement of bitcoin's bull runs and investors seeing their initial investment grow tenfold, the future of bitcoin as a payment system must be considered. If not, it defeats the purpose of cryptocurrency in revolutionizing the global payment system and reduces it to just another money-making venture akin to stocks.
Additionally, by granting bitcoin legal tender status, businesses will be able to accept it as a form of payment without limitation, re-promoting it as a payment method. As more countries follow El Salvador's path, we may expect bitcoin's price to settle and the focus to shift away from profit and more towards payment.
We may eventually reach a stage where bitcoin can be used just as easily as fiat currency to pay for items like groceries and utilities. This enables El Salvadorans to send money home and make payments within the country in a more convenient and government-approved manner. For the rest of the globe, it is a significant step towards the more financially equal and crypto-friendly future.
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