Bank of America outlined some of the benefits of adopting Bitcoin as legal tender in El Salvador. These opportunities include low-cost remittances, financial digitization, more choices, and more investment by foreign companies.
Bank of America highlights the opportunities that Bitcoin as a legal tender brings to El Salvador
The Bank of America (BOA) outlined some of the potential benefits of El Salvador’s adoption of Bitcoin as legal tender in a report released last week.
Analysts, including the Latin American strategist Claudio Irigoyen (Claudio Irigoyen) explained: “The market is too pessimistic about this and ignores any supporting arguments, even if the benefits are undoubtedly more uncertain.”
First, report details:
Bitcoin can be used as an intermediary for cross-border transfers… Compared with traditional remittance channels, using Bitcoin for remittances may reduce transaction costs.
Bank of America analysts further pointed out that if the conversion between BTC and the U.S. dollar “occurs automatically,” Bitcoin’s volatility may decrease.
The remittance fees charged by financial intermediaries will be reduced, allowing the recipient to have more disposable income. However, Bank of America warned that “it’s not clear how bitcoin transaction fees compare to traditional remittance channels.”
Second, the Bank of America report described that “financial digitization” may be another benefit, because “more than 70% of adults in El Salvador do not have a bank account.” Analysts emphasized that “the democratization of electronic payments through Bitcoin is progressive. “
In addition, Bank of America analysts pointed out that the adoption of Bitcoin as legal tender “provides consumers with more choices” and elaborated:
We do not agree with the view that as long as the company has the appropriate technical infrastructure, the company must be legally obliged to accept Bitcoin as a method of payment.
They further explained that payments can be automatically converted into U.S. dollars using the government’s electronic wallet Chivo.
Finally, the report stated that the adoption of Bitcoin may flow foreign direct investment (FDI) into El Salvador, such as from Strike, Bitcoin miners and ATM manufacturers. At least two encrypted ATM companies have announced plans to install encrypted ATMs in El Salvador: Chainbytes and Athena Bitcoin.
Despite seeing some benefits, Bank of America believes that the adoption of Bitcoin as legal tender in El Salvador is generally negative, mainly due to the high volatility of cryptocurrencies. Analysts explained that making people pay taxes on highly volatile assets is particularly worrying, and warned that if prices fall, this could lead to a sharp drop in income.
What do you think of the Bank of America’s view of Bitcoin as the legal tender of El Salvador? Let us know in the comments section below.
Image Source: Shutterstock, Pixabay, Wikimedia Commons
Disclaimer: This article is for reference only. It is not a direct offer or invitation to buy or sell, nor is it a recommendation or endorsement of any product, service or company. Bitcoin.com does not provide investment, tax, legal or accounting advice. The company or the author shall not bear direct or indirect responsibility for any damage or loss caused or claimed to be caused by using or relying on any content, goods or services mentioned in this article.