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In June, El Salvador became the first country in the world to introduce Bitcoin as legal tender
Bank of America sees the benefit of lower transaction costs
Bitcoin volatility harbors dangers
Bank of America – Change of opinion on Bitcoin
That Bank of America (BoA), of all people, spoke up and supported the actions of El Salvador initially caused astonishment, since the American big bank had been extremely critical of the cryptocurrency in March of this year. Bank of America sees no reason to own Bitcoin, apart from wanting to speculate with it, the banking giant is quoted on BTC-Echo. This opinion seems to have changed since the bank recently published a document via Twitter in which opportunities and positive perspectives are presented that could arise for El Salvador through the introduction of Bitcoin as a means of payment.
– Diario El Salvador (@elsalvador) August 1, 2021
What advantages does Bitcoin offer for EL Salvador?
With the help of the digital currency, the country could significantly reduce the transfer fees. A payment system that is detached from the US dollar can make necessary international transfers much cheaper, according to the BoA document. Most recently, around a quarter of the gross domestic product, around six billion US dollars, was spent on international transfers each year. A large part of this sum are transaction costs, which could be reduced by paying via Bitcoin. The idea behind it is that the sender converts US dollars into Bitcoin, the money is transferred via Bitcoin and the recipient then transfers the Bitcoin back into US dollars. – Trade Bitcoin with Plus 500 – that’s how it works. 72% of retail investor accounts lose money when trading CFDs with this provider. You should carefully consider whether you can afford to take the high risk of losing your money. – In addition to this cost reduction, Bitcoin could help give everyone in the country access to the financial sector. According to the BoA, two-thirds of the people in El Salvador do not have a bank account. In addition, the recognition of Bitcoin as legal tender could make El Salvador interesting for mining companies. Many companies are looking for new locations, especially in light of the fact that China recently banned Bitcoin mining on a large scale. President Bukele announced the possibility of using geothermal energy from volcanoes to sharpen the cryptocurrency in order to generate bitcoins with clean energy.
BTC as a means of payment harbors doubts and risks
In addition to the potential benefits that Bitcoin could bring to the country, there are of course doubts and risks. Internet coverage in El Salvador is one of the worst in the world and the country’s poverty makes it possible for many people not to own a smartphone, said Cyrus de la Rubia in a guest article in Manager Magazin. Without the Internet and without a smartphone, there would be a lack of infrastructure for Bitcoin. In addition, the volatility of the cyber currency is a problem. If the bitcoin goes up, many people will not exchange the bitcoin for US dollars to benefit from the price increase. But if the rate then falls rapidly, as it did recently, many people could become insolvent. For Bitcoin and cryptocurrencies in general, El Salvador’s move is of course positive. According to Cointelegraph, several other Latin American countries have already indicated that they want to develop a crypto strategy.
Finanzen.net editorial team
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