El Salvador has become the first country to adopt Bitcoin as official legal tender – but it will not be the last.
The legislative assembly of El Salvador on early Wednesday voted to pass a bill that declared Bitcoin, the world’s largest cryptocurrency by market capitalization, as legal tender, according to the Communications Secretariat of the Presidency of the Republic of El Salvador.
It secured 62 out of 84 votes.
The moves comes as some larger, more powerful countries are trying to quash or slow the inevitable shift to borderless, global, digital currencies.
But this small Central American nation has embraced the biggest one of them all – Bitcoin – and recognised it as official legal tender.
El Salvador has made history and become a true pioneer of the digital age.
Where El Salvador has led, we can expect other developing countries to follow.
This is because low-income countries have long suffered because their currencies are weak and extremely vulnerable to market changes and that triggers rampant inflation.
This is why most developing countries become reliant upon major first-world currencies, such as the U.S. dollar, to complete transactions.
But reliance on another country’s currency also comes with its own set of, often very costly, problems.
A stronger U.S. dollar, for example, will weigh on emerging-market economic prospects, since developing countries have taken on so much dollar-denominated debt in the past decades.
By adopting a сryptocurrency as legal tender these countries then immediately have a currency that isn’t influenced by market conditions within their own economy, nor directly from just one other country’s economy.
Bitcoin operates on a global scale and is, as such, largely impacted by wider, global economic changes.
In addition, cryptocurrencies could also help bolster financial inclusion for individuals and businesses in developing countries as they can circumnavigate the biases of traditional banks and other financial services providers.
There will no doubt be critics — probably those based in wealthy countries — who will knock this bold move by El Salvador.
But I believe we should welcome the forward-thinking approach to solving complex issues.
Nigel Green is founder and CEO of deVere Group. One of the world's largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.
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