If you’ve even glanced at the financial news during the past few weeks, chances are you saw a rather strange story about the national government of El Salvador’s announcement that it will soon use bitcoin as part of its official, legal tender currency, alongside the existing national currency of the USD. There are all sorts of reasons behind the political and economic decision, but the most relevant part of the event is what’s happened since the revelation. For a quick overview of all that’s going on, here’s a short roundup of relevant information and potential fallout from El Salvador’s action.
The IMF and World Bank
Oddly, when Salvadoran officials contacted the United Nations about the currency changeover, they were met with a cold shoulder. The reason for the call was that El Salvador wanted help from the international organization with the details of the transition. Whenever a national government switches its form of monetary denomination, the U.N. offers logistical and professional assistance. That’s one of the reasons the U.N. exists, but apparently no longer. The International Monetary Fund, within the U.N.’s World Bank, has said it will offer no help to El Salvador. But, in public statements, the IMF said they were not against the country switching to utilize bitcoin as its formal currency along with the USD. However, Salvadoran officials say the agency won’t do a thing for them.
Wider Bitcoin Adoption
The situation is sort of a test case for the future of the world’s largest cryptocurrency. So far, the non-participation by the World Bank has not been a major factor for people who frequent Bitcoin trading sites, nor has there been a major international incident. For now, it seems like traders and investors are waiting out the result. If El Salvador is eventually successful with their goal of using bitcoin as a national currency along with the USD, even without help from the U.N., that could bode well for other nations that are having trouble with their own monetary stability. Indeed, the entire crypto community, as well as major financial institutions, and other governments are keeping a close eye on developments. So far, there have been thousands of retailers, corporations, and government agencies around the globe that accept bitcoin as a form of legal payment. But El Salvador’s move marks the first time an entire national governmental entity has attempted to utilize a cryptocurrency as part of their accepted currency.
Potential Price Changes
Could the adoption of bitcoin as a national, legal tender currency affect the price of BTC and other cryptos? There’s a strong possibility it could, and in a very positive way. Historically, all the cryptos have enjoyed price rises after one or another large corporation announced that it would accept the virtual money as a form of payment. But, for a national government to do so could have even deeper repercussions. It would signal the final phase of bitcoin’s drive for recognition and credibility. Companies, retailers, financial institutions, and private citizens are one thing. Nations are another. There’s a likelihood that the whole El Salvador situation with bitcoin could end up being one of the biggest successes the coin has had since its debut in 2009.