What is the reason for Bitcoin to become legal tender?

On March 3, the southern Swiss city of Lugano announced that Bitcoin and USDT will be used as legal tender, and will cooperate with Tether to make it the European Bitcoin capital. This news has attracted widespread attention in the market, and this is the second region to publicly disclose bitcoin-related plans after El Salvador launched its plan to build a “Bitcoin City”. Behind this, what kind of “ambition” does Lugano have?

With the increasing popularity of Bitcoin, digital assets are more and more recognized and accepted by the mainstream world. Under this trend, which countries or cities have currently set Bitcoin as legal tender? What are the pros and cons of Bitcoin as legal tender?

Lugano’s “Bitcoin Project”

On March 4, 2022, the Swiss city of Lugano announced that Bitcoin, USDT and the Swiss franc stablecoin LVGA will become the legal tender of Lugano, allowing citizens of the city to pay for public services using the above-mentioned encrypted assets fees or taxes. The announcement was made at an event called “Lugano’s Plan ₿”, which is hosted by the city of Lugano in partnership with crypto stablecoin provider Tether, as well as “Plan ₿”. The partnership between Lugano and Tether aims to create the city as a hub for blockchain adoption in Europe.

The initiative has also led to the launch of two funds, one of which is a CHF 3 million (~$3.26 million) fund set up by Tether and the Lugano government to encourage the adoption of BTC, USDT and LVGA in shops and businesses across the city Token. The second is an investment fund of up to CHF 100 million that will fund local blockchain startups and blockchain service providers in Lugano.

Lugano is the largest city in the canton of Ticino, Switzerland. It is also a lakeside city at the southernmost tip of Switzerland and bordering Italy. It is a famous tourist city and an international financial market. The Bitcoin initiative will enable over 60,000 citizens of Lugano to use BTC, USDT and LVGA to pay all personal and corporate municipal taxes” such as public services, parking tickets, ID and passport issuance fees, naturalization fees, etc. .

Tether and the government of Lugano plan to use crypto payments in the community to demonstrate blockchain use cases, and the city has joined forces with more than 200 shops and businesses to drive bitcoin adoption. Additionally, they will overcome the scalability hurdles of city payments through the Bitcoin Lightning Network.

It is understood that Switzerland itself has always been one of the more friendly countries for crypto assets. Earlier, Swissquote Bank, the country’s largest online bank, announced plans to launch its own digital asset trading platform in 2022 to meet the growing demand for digital assets from customers. Talking about the partnership, Paolo Ardoino, CTO of Tether, said, “After declaring Bitcoin legal tender, El Salvador’s GDP increased by 10% and tourism increased by 30%. Imagine we could be in Europe What does a city in the center do.”

The Progress of Bitcoin as Fiat Currency

Of course, Lugano is not the only city or region to introduce Bitcoin to fiat money. Before that, El Salvador was the only country in the world to have Bitcoin as legal tender. On June 9, 2021, El Salvador passed a bill to make Bitcoin the national legal tender, which went into effect on September 7 last year.

Compared to Lugano, El Salvador has bitcoin as its second official currency, while the Swiss franc remains the only legal tender in the city of Lugano. Therefore, El Salvador’s plans for Bitcoin are clearly more “aggressive.” In addition, El Salvador also

Announced at a Bitcoin conference event that the world’s first “Bitcoin City” will be built within the country and funded through the issuance of Bitcoin bonds. According to El Salvador’s finance minister, the country will issue its first bitcoin sovereign bond from March 15 to 20.

Perhaps it was El Salvador’s “demonstration” role and the remarkable progress that made Lugano willing to cooperate with Tether, announcing the launch of its own bitcoin plan, including bitcoin as legal tender, and will also be committed to building it It has become the center of blockchain adoption and the European capital of Bitcoin, driving the adoption of crypto assets such as Bitcoin.

For a sovereign country or region, accepting Bitcoin as legal tender is an extremely innovative and “bold” decision and move. Of course, globally, Lugano is not the only region taking action in this area. Since the beginning of this year, both California and Tonga have the intention or idea to establish Bitcoin as legal tender.

In March,media reported that the California legislature introduced a bill that could establish bitcoin as the state’s legal currency. Rally Bill 2698 was introduced on Feb. 19 by Republican state Assemblyman Jordan Cunningham, which was later brought to the committee. But amendments to the constitution may be required before it can be passed, and the process is complicated.

The small Pacific country Tonga also said in March this year that it may adopt bitcoin as legal tender in the second quarter of 2023, and will conduct bitcoin mining in the third quarter. Former Tonga MP Lord Fasitua has revealed the timetable for the country’s plans to adopt Bitcoin. The first step is remittance, the second step is fiat currency, the third step is Bitcoin mining, and the fourth step is the transfer of national finances to Bitcoin, effectively upgrading the country to Bitcoin standards.

Why is Bitcoin legality recognized?

In the Russian-Ukrainian conflict, Ukraine, which is in the eye of the storm, has become the top five countries in the use of cryptocurrencies, and has passed the new “Ukrainian Virtual Assets Law” to establish the legal status of cryptocurrencies such as Bitcoin in the country. , the bill legalized crypto exchanges and cryptocurrencies. Ukraine will open the cryptocurrency market to businesses and investors by 2022, according to the Kyiv Post.

Why are more and more countries tending to accept Bitcoin, or even legalize it or make it legal tender?

First of all, for some countries and regions, the decentralization and deregulation characteristics of Bitcoin can bring great convenience, and even a certain degree of maintenance and “rescue” of national sovereignty. Especially in some small and medium-sized countries facing the collapse of the legal currency system or the crisis of war, it is easy to start turning to a “non-mainstream” currency such as encrypted assets. For example, Venezuela has become a hot spot for Bitcoin mining and encrypted payments due to the long-term serious economic deterioration and inflation.

For another example, in El Salvador, because 70% of the people do not have access to banking services, the country hopes to change the status quo of relying on cross-border remittances and attract foreign investment by establishing an ecological environment for the use of cryptocurrencies. In El Salvador, cross-border remittance accounts for 24% of GDP. Compared with traditional remittance channels, Bitcoin may reduce cross-border transaction costs and increase the disposable income of some people.

Secondly, with the promotion and popularization of Bitcoin around the world, Bitcoin is gradually becoming a global asset. Its reputation as “digital gold” and its acceptance by the mainstream world have deepened and changed the perception of Bitcoin in many countries. Legalizing Bitcoin can attract innovation in the blockchain field to a certain extent and attract more compliant traders.

However, on the other hand, due to Bitcoin’s deregulated nature and its high price volatility, accepting Bitcoin as a legal currency is more complicated and difficult in most countries. Some critics argue that adopting bitcoin as legal tender poses a risk to the stability of the country’s economic system. Secondly, the transaction fee and transaction time of Bitcoin are also a factor to be considered. Of course, in recent years, we have also seen the implementation and use of Lightning Network in some countries, which can play a certain supporting role in payment. International financial institutions such as the World Bank and the International Monetary Fund (IMF) have expressed concerns and even opposition to the adoption of Bitcoin as a national currency. Because privately issued tokens evade regulation by governments and central banks responsible for maintaining economic and monetary stability.

It is expected that in the future, there will still be relatively large differences in the attitudes of various countries towards encrypted assets, but with the evolution of the “mainstreaming” trend of Bitcoin, the “Bitcoin City” plans similar to El Salvador and Lugano may be more Country or city appears. The adoption of Bitcoin in the mainstream world and the beginning of many countries to bring crypto assets into regulation will have a profound impact on the future status and development of Bitcoin.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-is-the-reason-for-bitcoin-to-become-legal-tender/
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