• El Salvador’s new Bitcoin law has drawn attention from critics since the approval of the legislation.
  • However, Bank of America seems to be supporting the move, pointing out multiple benefits of BTC as legal tender in the country.
  • The Latin American country could attract foreign direct investment flows as it becomes a major crypto mining hub in the future.

El Salvador President Nayib Bukele first introduced the move to declare Bitcoin as legal tender in the country in June and is now expecting the leading cryptocurrency to be adopted in early September following the proposal approval. The new legislation has attracted backlash from the country’s opposition party, as well as the IMF. However, Bank of America, one of the oldest financial institutions in the United States, is showing support for the BTC move.

Bank of America highlights implications of Bitcoin as legal tender

Bank of America stated that there are some key opportunities that Bitcoin can offer to the Latin American country. A major advantage seen from the bank’s perspective is that around 70% of citizens in El Salvador do not have access to a bank account and financial services.

Bitcoin could further introduce a lowered cost of remittances, which was President Bukele’s primary goal. Currently, remittances from abroad comprise one-fifth of El Salvador’s gross domestic product. Salvadorans would, in turn, be able to receive a higher disposable income.

While El Salvador also plans to leverage its geothermal energy from its volcanoes to mine Bitcoin, Bukele stated that a mining hub is being designed to use cost-effective, clean and renewable energy to power the operation.

El Salvador could further attract foreign direct investment flows in its aim to become a major Bitcoin mining hub. 

Bank of America further highlighted that another positive implication of the adoption of Bitcoin is financial digitalization and that democratizing access to electronic payments has a progressive touch.

However, not everyone agrees with Bank of America. The International Monetary Fund (IMF) warns that there could be “dire consequences” of adopting Bitcoin as a national currency. Two IMF officials stated that any country granting cryptocurrencies legal tender status could be risking domestic prices becoming highly unstable. 

The IMF believes that cryptocurrencies are closely linked with money laundering and the financing of terrorism and have issues with macroeconomic stability and the environment.

Recently, ratings agency Moody’s Investors Service downgraded the El Salvador government’s rating due to the uncertainty around fresh funding from the IMF.

In late June, El Salvador’s opposition party sued the government over the Bitcoin law, stating that it was unconstitutional. About 80% of the country’s citizens support the argument, expressing that the new law did not consider harmful effects.

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Weekly Forecast: If bulls are back, this is where you can accumulate BTC next

Bitcoin Weekly Forecast: If bulls are back, this is where you can accumulate BTC next

Bitcoin price shows a lack of momentum after an explosive move in the last three weeks. The fourth week has been relatively silent, without a lot of volatile moves.

More Bitcoin News

Ethereum Classic Price Forecast: Do not count on large recovery for ETC in Q1, Q2 of 2023

Ethereum Classic Price Forecast: Do not count on large recovery for ETC in Q1, Q2 of 2023

Ethereum Classic (ETC) saw the headwinds that triggered the massive sell-off of 2022 fade a bit to the background in the first weeks of 2023. That resulted in bulls returning to life after a hibernation of almost five consecutive straight months.

More Ethereum Classic News

Ripple will win the legal battle with US SEC in the Supreme Court: John Deaton

Ripple will win the legal battle with US SEC in the Supreme Court: John Deaton

Ripple, the cross-border remittance giant is likely to win its legal battle against US financial regulator, the Securities and Exchange Commission (SEC) according to crypto proponent John Deaton.

More Ripple News

The real reason why Shiba Inu diamond hands refuse to sell despite 40.6% SHIB price rally

The real reason why Shiba Inu diamond hands refuse to sell despite 40.6% SHIB price rally

Shiba Inu holders who acquired SHIB more than 11 months ago are holding onto their tokens. These holders have refrained from selling their SHIB holdings since December 2021.

More Shiba Inu News

US Dollar Index struggles to defend 102.00 ahead of US PMI, GDP data

US Dollar Index struggles to defend 102.00 ahead of US PMI, GDP data

US Dollar Index (DXY) seesaws near 102.00 as the bulls struggle to defend the first daily gains in three, marked the previous day, during early Tuesday’s inactive trading.

Read full analysis

BTC

ETH

XRP