June 9, 2021, marks the first shift that would create history in the timeline of Bitcoin. El Salvador passed a bill where 62 in a total of 84 congressional voters would make Bitcoin as legal tender in that country. And then to September 7, when El Salvador became the first nation to make Bitcoin as legal tender. In this article, we will have a look at what it implies to make Bitcoin or any other crypto a legal tender.
What Is Legal Tender?
“This note is legal tender for all debts, public and private” will be the message to all U.S banknotes. The government has enforced the statement in federal law in varied forms since the 1880s. Hence, legal tender implies money, in banknotes or coins, that is acceptable if provided in debt payment. An asset termed as legal tender does not imply that citizens can use that for regular use. It varies from one nation to another and how they illustrate legal tender.
How Bitcoin As Legal Tender Affects Merchants?
Legal tender, however, does not imply that merchants should accept it as a payment form. The definition only revolves around debts that creditors have to pay. The U.S. treasury, which mints and prints coins, states so on its official website. Even more, the Federal Reserve, which circulates currency to banks, assures it on its site, too. Hence, you will find that a lot of entities like airlines take credit card payments. On the contrary, small retailers only accept cash.
Any currency that is issued by the Fed Reserve is under the legal tender definition of U.S. Hence, no seller has the command to accept cash dollars as payment. The same is applicable to most nations where banknotes and coins are legal tenders.
Repercussions For The EU
In the EU, they do not consider electronic money like Bitcoin as legal tender. Most states do not believe Bitcoin to be e-money. That is why the recent status as legal tender does not alter this situation.
Still, there are anti-money laundering issues. The AMLD5 illustrates digital currencies as a digital portrayal of value that is not issued by a public authority or central bank. They are not crucially a currency. Instead, the people who use it as a form of exchange accept it as legal.
Initially, Bitcoin fulfilled all these fundamentals of a digital currency. However, since then, it has become a legal currency in the nation. So, the question is whether that disqualifies BTC and digital currency under the AMLD5.
Bitcoin As Legal Tender: Regulation Issues
As per the theory, the providers of Bitcoin exchanges and custodian wallets would no longer fall in the EU AML structure. If this is the scenario, other digital currencies continue to prevail under the legal structure. Also, regulators have done a lot about BTC anti-money laundering, and they are doubtful to let it all go away.
You should also note that the legal tender implication only came later. Also, it still requires revisions to encompass Bitcoin as legal tender. It would be wise to form an apparent distinction for digital currencies as legal tender for regulatory reasons
Taking Care Of The Unbanked
However, the only issue is not high charges. Many migrants do not even have bank accounts in their home nation. Also, their families may be among the 1.7 billion in the world without access to bank services. With BTC, one only requires an internet connection and a digital device to have a wallet.
Along with that, some international migrants may have to send funds to countries that do not have access to banks. For example, they cannot operate cross-border transfers to states like Cuba or Syria.
As Bitcoin turns into legal tender, citizens get access to digital wallets to carry out transactions. It can also increase the growth of P2P digital infrastructure completely, which has made a prominent contribution to financial inclusion.
High Fluctuation May Destabilize The Economy
Having two tenders is a constructive idea for diversifying payment methods in a given nation. However, there is a problem when one of them is a highly fluctuating currency that can alter its value in just a minute.
Since citizens can use Bitcoin as legal tender to pay debts, look at this case. When one owes a debt in BTC, there are several arising problems. Who decides how many BTCs are under ownership by the end of a particular period? Will the decision be dependent on the Bitcoin price at the time of debt or time of repayment? Here, keeping in mind that just a few days could create a huge difference in the price.
With this in mind, if the purchaser anticipates the price to increase, the most obvious thing is to wait. If the prices were going to decrease, merchants would not accept the payment. Hence, the U.S. dollar is still applicable in most transactions.
The Bottom Line
El Salvador is the first nation to adopt Bitcoin as legal tender is a prominent milestone for the digital currency. It has taken digital currency 12 years to become the official currency of a nation, and that is impressive. Also, with respect to regulation, this is the furthest it has come.
The question of whether other nations will follow the shift stays unanswered. However, the film is a chance to test out the practicability of bitcoin as a currency of a country. Of course, El Salvador has encountered a lot of negativity. Nearly two-thirds of its population is against the use of BTC as a legal tender. President Bukele is optimistic that he can improve the economy and encourage investors to spend crypto in his nation. Well, time will tell.
Frequently Asked Questions On Bitcoin As Legal Tender
1. Which is the first country to formally adopt bitcoin as legal tender?
June 9, 2021, marks the first shift that would create history in the timeline of Bitcoin. El Salvador passed a bill where 62 in a total of 84 congressional voters would make Bitcoin as legal tender in that country. And then to September 7, when El Salvador became the first nation to make Bitcoin as legal tender.
2. Bitcoin legal currency in which country?
Bitcoin is considered as a legal tender in El Salvador.
3. Which countries will make crypto legal tender next?
It is not even clear about the other nations that will make Bitcoin as legal tender. Only time can answer this question.