The adoption of the bitcoin standard by nation-states has begun. El Salvador will become the first country to declare BTC as legal tender. The announcement was made recently; The crypto space and its industry are still processing its impact.
Although a relatively small country, El Salvador can trigger similar effects when MicroStrategy adds BTC to its treasury. At the time, the domino effect caused one of the largest periods of BTC adoption by public companies.
The head of state of El Salvador, Nayib Bukele, said via his Twitter handle, Bitcoin has a market cap of $680 billion. If 1% of this number is invested in this country, their GDP could increase by 25%, according to Bukele’s calculations.
After a violent civil war, El Salvador adopted the dollar as its official currency. Many went into exile or moved to other countries with better economies. This had two consequences for the country: it depends on the stability of the US dollar, With concerns about rising inflation in this currency it seems logical for the country to promote an alternative.
As a second consequence, many people receive remittances. About $6 billion is paid to third parties to process the remittances. Bukele claims that by adopting BTC, 1 million low-income households will benefit and their income will increase “by the equivalent of billions of dollars each year”. bukele said:
Bitcoin, on the other hand, will have 10 million potential new users and will be the fastest growing way to move $6 billion per year in remittances.
Further data provided by the head of state indicates that around 70% of the country’s population does not have banking facilities. However, many people have access to a smartphone. Bitcoin will be a tool to create financial inclusion and help in economic growth. People will be able to save, invest, access credit and their transactions will be secured by BTC’s network.
One small step, one big step for bitcoin…
Many countries around the world share these terms. Many wondered how long it would take for other heads of state to notice its benefits. Bitcoin standard. In the US alone, local government officials, senators, congressmen and congressmen and other government officials have celebrated the declaration.
22-year-old Wall Street veteran Caitlin Long, a member of the Wyoming State-appointed Blockchain Select Committee, believes the El Salvador decision could open a back door for banks in the US to handle bitcoin.
1/ Thread about a historical day #bitcoin: #El Salvador President publicly declares support for legislation #B T c legal tender. *If* this becomes law, it will have many secondary effects. steel yourself for a big fight over this is probably going to comehttps://t.co/BrrNxaLzpZ
— Caitlin Long (@CaitlinLong_) 6 June 2021
Long explained that “legal tender” being a commercial law term, it means that citizens can offer an asset for an obligation and to pay in return for an asset. He added that:
Legal tender is the key to commercial law, the foundation of any legal system (…). Bitcoin is regarded as an “indefinite intangible” meaning low-cost-or-market, but if it is a foreign currency it tends to go up and down mark-to-market.
This means that BTC can be added to corporate treasuries without the company facing “punitive accounting”. BTC can be treated like any other foreign currency. Thus, more companies can benefit in adopting BTC. Long said that cryptocurrencies can be thought of as money and explained:
This means that bitcoin will gain a special status in the banking system on a global scale. Banks will probably treat it the same way as any other foreign currency. #Bitcoin *May* get back-door favorable treatment under bank capital requirements.
US commercial law angle. If El Salvador does indeed go ahead and recognize bitcoin as legal tender… bitcoin then becomes “money” under UCC 1-201…. 🧐 https://t.co/CQLZhXt2XE
— Andrea Tosato (@Andrea_Tosato) June 5, 2021
while writing, BTC price action remains volatile and trades at $36,140. The cryptocurrency is moving in the middle zone of its current levels. There is a lot of uncertainty for the coming weeks, with many expecting more downsides, but recent announcements could have an impact in the short term and add fuel to the rally to resume.