As with many things crypto, it is necessary to get your definitions straight at the outset (and then hope they don't change too quickly thereafter!).
So here is a brief working guide to some of what follows:
- A country can adopt anything as Legal Tender.
Legal tender is anything recognized by law as a means to settle a public or private debt or meet a financial obligation, including tax payments, contracts, and legal fines or damages. The national currency is legal tender in practically every country. A creditor is legally obligated to accept legal tender toward repayment of a debt.
2. Something being 'legal' in a country doesn't make it 'legal tender'.
So, in El Salvador, where Bitcoin has been adopted as legal currency, you can use it to buy, sell, transact, bank and do pretty much everything you would do with other forms of currency within the country with all the associated legal protections.
The Bitcoin Law became effective on September 7, compelling businesses to accept bitcoin as a form of payment for all transactions. It all appears to be going ok...sure, some people are complaining because not every single shop accepts the coin and the international banking community has tut-tutted at the impact on the national current account of the use of tax revenues to purchase Bitcoins for the national treasury. Short term issues, no biggies!
Who could be next?
In terms of nation-state adoption of crypto, the phase will be Caribbean and South Pacific. These areas already face issues with delays and high fees sending value from island to island. Internet of value and crypto infrastructure will usher in financial inclusion and prosperity.
Zhu Su @zhusuCEO/CIO at 3ac
Panama moved towards bitcoin adoption on the same day that El Salvador became the first country to accept bitcoin as legal tender.
The country unveiled a draft cryptocurrency law which seeks to increase the use of Bitcoin and Ethereum as payment options and to encourage the use of blockchain technology in the public and financial sectors.
Unlike El Salvador, Panama did not decree that businesses should accept Bitcoin or any other cryptocurrency. Proposed mandatory retail adoption generated resistance from traders and consumers, who were not happy about being compelled to use Bitcoin as a currency all of a sudden.
The Parliament here voted almost unanimously to legalize and regulate cryptocurrencies, one day after El Salvador’s official adoption. The new law does not make Bitcoin (or any other cryptocurrency) legal tender, it does empower the country to regulate them. Their hope is to use them to generate investment in technology in an attempt to establish the country as a tech hub in the future.
Until now, cryptocurrencies in Ukraine were treated as illegal and, unlike El Salvador, Ukraine’s crypto law will not encourage the use of Bitcoin as a payment method and would not put it on par with the Hryvnia, the official currency.
On this Caribbean Island nation (still under significant economic sanctions after nearly 60 years), Bitcoin and other cryptocurrencies are now legally recognized as a means of payment for commercial transactions.
The Banco Central de Cuba (BCC) approved Resolution 215 of 2021, which recognized cryptocurrencies on September 15, 2022, a couple of days after El Salvador’s Bitcoin Law came into law.
Despite authorizing use in Cuba, the BCC still has concerns about the use of cryptocurrencies, which may inhibit any move to further legalization, notably, on monetary policy, financial stability and the potential for anonymity to mask transactions for illicit or illegal purposes.
Other candidate countries would include Puerto Rico and Argentina, so what are the obstacles?
For a start, the robustness, speed and scalability of the system, as is, are all concerns. Strike and the Lightning Network will address these, in part:
There are also more than a few countries that have already decided that it is not for them and have, for a variety of reasons (some practical, some not so much), banned all cryptos, for now:
The final obstacle, and probably the most likely to obstruct mass nation-state adoption of Bitcoin or other cryptos as legal tender, is the centralized master plan by Central Banks, Financial Institutions and Governments to create their own digital currencies - the Central Bank Digital Currencies (CBDCs), combining the advantages of digital with traditional money.
Over 60 governments are already working on them, interestingly, most are built on Bitcoin’s blockchain technology.
The Bahamas launched a cryptocurrency version of the Bahamian dollar in 2020 to avoid transporting cash between its 700 small islands.
Cambodia introduced its own CBDC, the Bakong. China has been testing its e-CNY money and may use it during the 2022 Winter Olympics. The US has two separate programs investigating a digital dollar, while the Bank of England is 'in consultation' with banks, merchants, and the public on its own digital money project.
The Central Bank of Nigeria – the continent’s most populous country – is trialling its CBDC, known as the e-Nairain.
Simple fact is that major world economies, bank, governments etc. are unlikely to support a cryptocurrency like Bitcoin because it is decentralized and, therefore, cannot be controlled by them!