On June 9, El Salvador became the first sovereign country to adopt bitcoin as a legal tender, and the event was cited by AFP as the 14th most significant in the history of the currency. According to the bill’s requirements, after Bitcoin becomes legal tender, the price of goods can be expressed in Bitcoin and any economic entity must accept Bitcoin as payment; Bitcoin transactions will not be subject to capital gains tax and can be used to pay taxes.
El Salvador is a coastal country located in northern Central America, with a land area of only about 20,000 square kilometers and 14 provinces. The country has a total population of about 6.7 million, but there are many gangs in the country, with nearly 3,400 people murdered in the first half of 2015, despite the president’s announcement of a major crackdown on street gangs, which basically stems from the fact that El Salvador has been subject to repeated colonial rule, followed by civil wars and constant social instability.
Economically, El Salvador is predominantly agricultural, producing mainly coffee beans and cotton, has a weak industrial base, is one of the world’s “lower middle-income countries” and has no sovereign currency, relying on the U.S. dollar for settlement. After the 2018 global financial crisis, El Salvador has been mired in inflation since the U.S. adopted quantitative easing, which is the main reason for its aggressive embrace of bitcoin.
In addition to El Salvador, many countries in Latin America share the same fate as it. Unlike developed countries that view the crypto world as more focused on the beauty of code and dedicated to building algorithms with greater anonymity, and subtle community governance structures. These third-world countries look to cryptocurrencies for their stable measure of value, storage of value, and the right to maintain purchasing power without being stripped away, in addition to the fact that Bitcoin and the blockchain have brought them a range of fast and inexpensive financial services that would otherwise be difficult to access.
PANews will take a look at what other countries in Latin America are most likely to adopt bitcoin after El Salvador.
Panama is the southernmost country in Central America, with a total area of about 76,000 square kilometers and a population of more than 4.3 million. The Panama Canal, which connects the Atlantic Ocean to the Pacific Ocean, holds an important strategic position and is the dividing line between South America and North America.
Given its important geographical location, Panama’s economy focuses on the service sector, with finance, trade and tourism as the mainstays. Among them, finance and re-export trade are well developed and play an important role in the economy. In addition, Panama has been using the U.S. dollar as its currency of circulation since 1907, and its national currency is the balboa, which is equivalent to the U.S. dollar and is used in the country at the same time, making it the first country in the world, other than the United States, to use the U.S. dollar as legal tender.
After El Salvador proposed a bill to adopt Bitcoin as a fiat currency, Panamanian congressman Gabriel Silva tweeted that Panama cannot fall behind and must support cryptocurrencies if it wants to become a true technology and entrepreneurial hub and will prepare a proposal to parliament.
And previously, Panamanian Vice President Rolando Rodríguez also proposed a draft bill to regulate cryptocurrencies in Panama in a legislative plenary session to regulate the use of cryptocurrencies and the forms of transactions in Panama, and also seeks to include cryptocurrencies in a state-backed social security fund to give financial freedom to all Panamanians who do not have access to common banking. guez also said that Panama lags far behind other countries in regulating cryptocurrencies and hopes that the bill will be given due attention by the General Assembly’s Committee on Trade and Economic Affairs.
Colombia is a land and sea country located in the north of South America, with an area of about 1.1 million square kilometers and a population of about 5 million people. 1821, Colombia also formed the Greater Colombia Republic with the current Panama, Venezuela and Ecuador, which was later dissolved in 1830.
Economically, the mainstays of the Colombian state are mining and agriculture. The country is rich in mineral resources, with oil, natural gas, coal and emeralds as the main deposits, with the world’s largest reserves of emeralds. The main agricultural products are coffee, bananas and flowers, of which coffee and bananas rank third in the world in terms of export volume, and flowers rank second in the world in terms of export volume. Colombia is at the middle level of development in Latin America, and its economy has been growing year after year for more than 10 years.
Recently, Jehudi Castro Sierra, digital transformation advisor to Colombian President Iván Duque Márquez, was in conversation with Jack Mallers, founder of the bitcoin lightning web wallet ZAP, the leading developer of the adoption of bitcoin as legal tender in El Salvador, and ZAP’s startup company Strike, has launched a bitcoin lightning payment application in El Salvador.
Jehudi Castro Sierra’s interest in cryptocurrencies, and his direct contact with the Colombian president, seems to indicate that the issue will generate interest in Colombia. And back in September 2018 to October 2019, during Jehudi Castro Sierra’s tenure as Colombia’s Deputy Minister of Digital Economy, he was also showcased on social networks as a technology enthusiast, especially for cryptocurrencies.
Venezuela is a country located in the north of South America, known as the “land of waterfalls”, with an area of more than 900,000 square kilometers and a total population of more than 31 million people. Venezuela is a member of the Union of South American Nations and the Organization of Petroleum Exporting Countries, and is also an important oil producer and exporter in the world, with the oil industry accounting for about 80% of Venezuela’s export revenue.
Previously, Venezuelan President Nicolas Maduro promised to revive the Petro Coin at the Constituent Assembly, stating that the state-run company Petróleos de Venezuela would conduct “exploratory sales” of 50,000 barrels of oil per day through the Petro Coin, and then consider extending the application of the Petro Coin to the whole country. After that, it will be considered to extend the application of petrocoins to the national oil trade, and then taxes and utility bills will be paid by petrocoins.
Nicolas Maduro said Venezuela is blazing a trail to a new economy, where the crisis caused by the old customs and the stagnant bureaucracy has stimulated the country’s innovative drive to go where it has not gone before and seek rebirth in the unknown.
However, the petrodollar, although issued by the Venezuelan government in 2017 in a high-profile manner, is also priced in the market through the central bank’s daily publication of the exchange rate of the petrodollar against currencies such as the yuan, in order to bypass U.S. economic sanctions and bring Venezuela back into line with international capital markets. However, since its release, the petrodollars have received a lukewarm response from the market, and most people do not even know where to buy them.
In addition, Dashcoin is hugely popular in Venezuela, with the number of wallets downloaded each month showing a significant upward trend since its adoption.
Ecuador is a country located in the northwest of South America, with an area of about 260,000 square kilometers and a total population of over 15 million. Since the establishment of the country, Ecuador has been politically turbulent, with numerous coups and alternating civilian and military governments for 19 times. Ecuador is famous for being the “Land of Bananas”, and economically it implements the policy of dollarization.
Ecuador’s Vice Minister of Economic Inclusion, Julio Eduardo Clavijo Acosta, is a crypto enthusiast who has changed his Twitter avatar to a laser eye and has repeatedly posted and reposted bitcoin and cryptocurrency related tweets. He also recently stated that Bitcoin’s ability to transform by supporting charity and alleviating poverty is proof enough of the power it can bring about change.
Also, in Ecuador’s 2021 election, presidential candidate Geovanni Andrade has expressed an interest in creating a national cryptocurrency to facilitate transactions within Ecuador, and the new cryptocurrency would be a stable coin related to gold.
Brazil is the largest country in South America, with a total land area of about 8.5 million square kilometers, the fifth largest in the world, and a total population of 210 million, making it the seventh largest economy in the world. Brazil has rich natural resources and a complete industrial base, developed agriculture and livestock, is the main producer and exporter of a variety of agricultural products; Brazil has a strong industrial base, complete categories, petrochemical, mining, steel, automotive industry, etc. more developed.
In March this year, QR Capital’s Bitcoin ETF was approved by the Brazilian Securities and Exchange Commission and will be traded on the B3 stock exchange in São Paulo under the QBTC11 ticker symbol, making Brazil the second country in the world to approve a Bitcoin ETF.
And, according to Globo, Brazil’s largest media outlet, the number of Brazilian bitcoin investors already exceeds the total number of individuals registered on the São Paulo Stock Exchange (B3) by about twice as much, while the actual number of traders is likely to be higher than that, with some traders likely using forex or trading only offline.
On the other hand, data released by the Brazilian Institute of Statistics and Geography (IBGE) showed that inflation in Brazil climbed to 8.06% in May this year, the highest level since September 2016, beating market expectations of 7.93%. The rising inflation rate has become a major reason for the cryptocurrency boom in the Brazilian market.
Located in the southeast of South America, Argentina covers an area of about 2.8 million square kilometers, making it the second largest country in Latin America after Brazil. With a population of over 45 million people, the country ranks 31st in the world in terms of population size. Argentina is one of the world’s leading producers and exporters of food and meat. Thanks to its rich natural resources, open-door policy and diversified economy, Argentina used to have a large middle class relative to other Latin American countries, and its economy was among the top ten in the world at the beginning of the 20th century.
However, the Argentine economy declined significantly in the 1980s due to the debt crisis. Since 2008, affected by the international economic and financial situation, Argentina’s economic growth has slowed significantly, inflation is high, the local currency has depreciated, and foreign exchange reserves have fallen. The downward pressure on the Argentine economy has increased in recent years, with an 11.8% economic recession in 2020.
In May this year, Bitcoin.com reported that more than 1 million Argentines have been buying cryptocurrencies over the past period of time. Local media outlet Ámbito revealed that most of them were buying Bitcoin and stablecoins such as USDT, USDC, and DAI. the outlet also highlighted that users see such tokens as a more efficient way to convert Argentine pesos into U.S. dollars.
In 2019, the value of the Argentine fiat currency, the peso, decreased by about 40% due to inflation. Currently, the Argentine Congress is advancing a bill related to digital currencies to provide a legal framework for them and encourage their adoption. Banks and companies may also choose to use digital currencies if adopted.
Paraguay is a landlocked country in central South America, with a land area of about 400,000 square kilometers, a population of nearly 7 million, a national economy dominated by agriculture and animal husbandry, and a weak industrial base, making it one of the most backward countries in Latin America.
However, Paraguay is a renewable energy hub, and all domestic electricity is generated by hydroelectric power. Paraguay’s ITAIPU hydroelectric power plant is the second largest in the world today after China’s Three Gorges – with an annual output of 103 megawatts, while Paraguay consumes only 20% of the country’s electricity and exports the rest.
According to local miner Gregorio Bareiro, Paraguay has plenty of energy to become a global center for bitcoin mining, and the best opportunity it has is not to sell energy to Brazil, but to invest in cryptocurrencies, according to The Guardian UK. In addition, the South Korean Blockchain Technology Foundation has been in talks with the Paraguayan government about establishing the world’s largest bitcoin mining farm and cryptocurrency exchange.
On June 7, after Paraguayan Congressman Carlitos Rejala announced in El Salvador that he would introduce a bill to allow Bitcoin to be considered legal tender, Rejala tweeted a photo of himself with laser eyes and said, “As I said a long time ago, our country needs to move forward hand in hand with the new generation. Our moment has come. This week, we started an important project where Paraguay really takes off before the world of innovation!”
With an area of about 2 million square kilometers, Mexico is the third largest country in Latin America and the fourteenth largest in the world, with a population of 123 million , the eleventh most populous country in the world. Mexico is a free market economy, with modern industry and agriculture, the proportion of private economy is also increasing significantly. 1994 after the formal establishment of the North American Free Trade Area, Mexico and the United States trade and investment flows increased rapidly, promoting its economic development and national income.
In February, The Economist published a report quoting Mauricio Hurtado, managing partner of PwC Mexico, who said Mexican companies are now eager to join the bitcoin boom. things have changed recently. Many businesses feel they simply can’t stay out of the way, and companies are adjusting to market realities in order to outperform and gain an edge over their competitors.
In June, Ricardo Salinas Pliego, the third richest man in Mexico, also changed his Twitter avatar to a laser-eyed avatar. pliego also said bitcoin was his “best investment ever” and changed his Twitter profile to bitcoin in February.
In addition, Mexican federal government Senator Eduardo Murat Hinojosa has also said he will submit a “legal framework for cryptocurrencies” to lawmakers. In a recent tweet, Hinojosa changed his profile picture to show his support for cryptocurrencies by speaking into a microphone with his trademark laser eyes.
In Latin America, Bitcoin Is More Popular Than Traditional Finance
In hyperinflationary Latin American countries, where economies tend to exhibit instability, holding national fiat currency often means a significant depreciation in purchasing power. Other means of investment, such as foreign exchange, gold and other hedges, have too high a barrier to entry and are difficult to access through traditional financial channels, so locals are turning to other cryptocurrency applications such as bitcoin.
Many of the problems caused by inflation and subsequent capital controls can be solved by Bitcoin. While workers and merchants initially used bitcoin as a hedge against the devaluation of local currencies, bitcoin is beginning to find multiple practical applications as a payment method in Latin America. As a universal currency, Bitcoin allows consumers to shop and transfer money globally. International companies, from Apple to Walmart, may not accept local means of payment in Latin America, but Latin American online shoppers can use Bitcoin to make purchases, and Bitcoin can help Latin American tourism weather the current economic crisis unscathed.
Because Bitcoin can be used by anyone with an Internet connection, it can also reduce the cost of foreign exchange for tourists and merchants. Because of the low penetration of credit cards in Latin America, some well-known tourist destinations can use bitcoin as a means of payment to attract more consumers, and pay faster and with a simpler process, without the costs and delays of wire transfers.
In addition, for bitcoin to become legal tender in El Salvador, Lepit Mining Pool CEO Jiang Zhuoer said this is a historic moment for bitcoin, a new offshore financial center will rise, and with blockchain offshore business registration, taxation and other preferential policies, the rise of small countries will not be a dream. Jiang Zhuoer is also more bullish on Panama’s prospects, adding, “Panama follows El Salvador and may become the next country to support legal status for cryptocurrencies. Panama also has much more influence than El Salvador as the country that controls the Panama Canal (the main route connecting the Atlantic and Pacific Oceans).”
Perhaps El Salvador is only a small country, but for this bold attempt on his part, some countries are already jumping on the bandwagon and trying to follow suit and follow suit. So far, Latin American politicians from seven countries have made it clear that they too are interested in bitcoin.
But “what goes around comes around,” the International Monetary Fund IMF said on June 10, and there are many economic and legal concerns about El Salvador’s move to make bitcoin legal tender, and that adopting bitcoin as legal tender could raise a number of macroeconomic, financial and legal issues that would require careful analysis.
But regardless, Bitcoin has taken another important step forward. Any sea change is always ripped from an unassuming crack, and the ground shaking brought about by cryptocurrencies like Bitcoin may not be far behind.
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