The Impact of Bitcoin as Forex Exchange in Adoption and Infrastructure Development
June 18, 2021 - Crypto News, Expert Commentary
For regulators, Bitcoin may be a genie already out of the bottle.
They had the chance to develop favorable regulations for a decade. However, they likely assumed that this asset would never grow beyond its previously fringe status.
The pace of Bitcoin adoption in the past year has been stratospheric.
Now, El Salvador has placed another significant card on the table. It has become the first nation to adopt Bitcoin as legal tender officially.
This move may lead to states doing more than just the bare minimum.
Bitcoin as Forex Exchange and International Finance Movement
Many Bitcoin enthusiasts would like to believe that Bitcoin could keep growing without government support.
Nonetheless, the pace of that growth can vastly improve if Bitcoin makes a significant entrance into the Forex market.
Yes, you heard that right. Bitcoin would have a seat among the high table of world currencies.
El Salvador now has the USD as an official currency and Bitcoin as legal tender.
To quote Michael Scott from The Office: How the turntables!
Bitcoin can play a meaningful role in this space. The ability to settle transactions like a central bank’s real-time gross settlement (RTGS) system is immense.
Instead of acting like another fiat currency that relies on central banks, Bitcoin is an international currency that runs on the consensus of a global community.
This community does not rely on existing intermediaries such as correspondent banks.
Instead, the Bitcoin blockchain provides a self-sustaining system that empowers everyone who uses the network.
Unsurprisingly, Central banks are actively researching distributed ledger technology to see how they can harness this innovation.
Therefore, there is a concerted effort to improve the timeliness and security of conventional international payment systems.
It is unlikely that the U.S. will take El Salvador’s approach soon. However, should there be a domino effect of countries exploring crypto, the Fed will have to take notice.
International businesses will also benefit from Bitcoin in the Forex sector. They don’t have to manage multiple currency accounts.
A single Bitcoin wallet serves Bitcoin transactions anywhere. These payments are secure and can allow business in countries with capital controls.
Having such a flexible settlement layer eliminates problems like cash-flow issues and credit risk.
The Latin American Region Take up El Salvador’s Approach
It is no secret that many Latin American nations have monetary crises.
Argentina and Venezuela already have significant capital controls and inflation due to monetary instability.
People in such jurisdictions look more to Bitcoin as a way to hold wealth and transact internationally.
Therefore, Central and Latin America can take after El Salvador in a meaningful way. Bitcoin can provide alternative routes to access the global economy for investors and the government alike.
Central American countries like El Salvador have an unfortunate dependence on the USD. Remittances from the immigrant community in the U.S. are a critical part of their economies. Even if they have misgivings about American policy in their region, these countries have little choice.
Bitcoin offers a chance to assert sovereignty over the USD.
This statement may sound ironic because Bitcoin itself does not swear allegiance to particular nations.
However, a country like Venezuela has little to lose by granting Bitcoin the status of legal tender. Their currency is already in the toilet, and Bitcoin can be a valuable draw for investors and allow local commerce to attract international capital.
Full disclosure, it will not happen overnight. The USD is still almighty for a reason. Nonetheless, it will give some of these countries options in navigating their economic future.
International companies in the region can integrate Bitcoin payments to streamline and simplify FX management.
Therefore, adding Bitcoin as legal tender is good for business in any country experiencing currency volatility.
This region, and many developing countries in Africa and Asia, should have a vested interest in El Salvador’s implementation of Bitcoin as legal tender.
A universal settlement currency protects against sudden adverse movements in local currency.
Bitcoin Adoption and Impact
The impact of El Salvador’s adoption could be far greater than anyone can imagine.
It could mean that BTC becomes acceptable as a Forex or traded foreign currency in every other country.
The international economy has a high level of integration and interconnectivity. Developments in one country have a cross-over effect into many others.
For instance, the U.S. classifies Bitcoin as property for purposes of taxation. Will the U.S. still tax U.S. nationals when they spend Bitcoin in El Salvador?
How is that going to stack up in a situation where Bitcoin is the official legal tender in one country?
Imagine the U.S. taxing its citizens on Euros that they spent in Germany just because it gained on the USD by the time you used them.
It is evident that there are loads of legal issues that arise from one country recognizing Bitcoin as legal tender. This equation will be even dicier if five or ten others join.
Therefore, this move will, at least, ignite debate on adoption and the international finance movement.
The possibilities from international Bitcoin adoption are massive.
In countries that rely heavily on remittances, using a currency with lower fees on remittances could be a boon to their economies.
El Salvador depends on remittances for almost a quarter of the GDP. President Bukele claimed that Bitcoin adoption would bring “financial inclusion, investment, tourism, innovation, and economic development for our country.”
There will be complaints about Bitcoin’s volatility. These are valid concerns, but perspective is essential.
Bitcoin is relatively volatile if you compare it to the top 30-40 currencies. Many countries have runaway inflation or even no currencies.
They typically rely on currencies like the USD. Bitcoin offers an alternative to foreign monetary systems and policies.
Advanced Mining Recognizes the Increasing Importance of Bitcoin
The recognition of Bitcoin as legal tender feels like a watershed moment. Stakeholders in the Bitcoin community have always known that this was possible.
However, they also saw the power of this asset to grow organically and were not holding their breath.
This belief is primarily because of the role miners play in Bitcoin. Mining helps to verify transactions and secure the network.
Bitcoin essentially does not need governments but could always use favorable regulations to thrive in specific jurisdictions.
Accordingly, Advanced Mining decided to facilitate easy Bitcoin mining. This activity is potentially lucrative when done in the right conditions.
Notably, it is remarkably competitive and requires elite Application Specific Integrated Circuits to work. Advanced Mining has a direct line to Bitmain, the best ASIC rig manufacturer in the world.
They offer equipment reselling services to prospective miners. Additionally, it has efficient data centers to provide hosting facilities for miners who also benefit from the professionalism and expertise of their technicians.
These take care of two vital variables in the mining process: Natural cooling and cheap electricity.
Bitcoin mining is more viable in these data centers.
In summary ,Advanced Mining is an experienced stakeholder in Bitcoin mining, playing a decisive role in heralding Bitcoin’s bright future. Visit our Mining shop today to learn more about Bitcoin mining!