Bitcoinist has followed closely the rollout of The Bitcoin Law in El Salvador. Via the National Congress, this country gave BTC the status of legal tender, the implications of this action are still under scrutiny but point toward a new phase of adoption for the crypto industry.
Related Reading | News From El Salvador, Early October: The Chivo Ecosystem’s Stress Test
In a recent post, the CEO of crypto exchange BitMEX Alexander Höptner took a deeper look into the situation in El Salvador, the reasons why Bitcoin makes sense in developing countries, and the opposition given by financial international institutions. Höptner made the following prediction:
My prediction is that by the end of next year, we’ll have at least five countries that accept Bitcoin as legal tender. All of them will be developing countries.
The executive based his arguments on the importance of Bitcoin in countries such as El Salvador. Long forgotten by the traditional finance system, they have little to no influence in the decisions that come from the U.S. Federal Reserve and other major central banks around the globe.
They usually impact the way their citizens live, trade, send money over from abroad. The COVID-19 pandemic has proven that central banks are willing to expand their monetary supply, create inflation, and affect their population in order to maintain the system running.
Bitcoin is a way to opt-out of that system or, at the very least as Höptner said, to “choose to try something new”. The executive said:
What the critics fail to recognize is that developing countries like El Salvador are leading the world in embracing decentralized digital currencies and payments. They’ve had decades to analyze how the global financial system works – and doesn’t work – for their populations.
The Three Factors That Will Boost Bitcoin Adoption
According to the CEO of BitMEX, there are 3 major variables that will play an important role in fulfilling his prophecy: remittances, politics, inflation. The first is one of Bitcoin’s most relevant use cases, and one of the main reasons why El Salvador decided to implement its BTC law.
Related Reading | By The Numbers: How Much Western Union And MoneyGram Will Lose From El Salvador’s Bitcoin Law
For the executive, remittances are a factor that “cannot be overstated” especially in developing countries around the world. In El Salvador alone, remittance accounts for over 20% of the country’s GDP in 2020.
Quoting data from the World Bank, Höptner claims that 75% of the global remittances are received by low and middle-income countries.
A large portion of that is lost to third-party companies that provide the service, right until a population discovers how much cheaper it’s to send money via Bitcoin or its second-layer solution, the Lightning Network. The CEO of BitMEX said:
US$540 billion in remittances reached low and middle income countries in 2020. That number would be a lot higher – and families in developing countries would be in a better position – with a cheaper method of remitting funds.
Additional data cited by Höptner from the IMF predicts average inflation of 5.4% for developing countries and 2.4% in developed countries. This will create incentives for people to look for alternatives to fiat currency and traditional investments to protect themselves from the impact on “consumer goods and services”.
As an example, the executive mentioned the increase in crypto adoption in Turkey. The national currency of this country has been heavily hit by inflation. Conversely, Bitcoin and crypto adoption surged.
Finally, Höptner pointed out that the Bitcoin Law in El Salvador will have other politicians in different countries trying to implement similar measures to their benefit. Crypto has become a “cultural touchstone”, a symbol of the lack of trust and faith in traditional institutions.
Related Reading | The President Shows El Salvador’s Volcano Bitcoin Mining Rig’s “First Steps”
Thus, politicians could attempt to capture the interest of young people and those that lost their faith in the status quo. This has the potential for great success, but not without its risks:
(…) it’s also true that any failings by these leaders in the implementation phase may hurt wider adoption of cryptocurrencies in general. That’s the dangerous dilemma that lies ahead.
At the time of writing, BTC trades at $55,130 with a 1.8% profit in the daily chart.
