The Bank of America has underlined some of the advantages of allowing bitcoin to be used as legal cash in El Salvador. Low-cost remittances, financial digitization, more options, and increased foreign investment are all possibilities.
Bank of America emphasises the benefits of Bitcoin as a legal tender in El Salvador.
In research released last week, Bank of America (BOA) underlined some of the potential benefits of El Salvador adopting bitcoin as legal cash.
The market has been too gloomy about it and is overlooking any argument in favour, even if those benefits are admittedly more uncertain,” said the analysts, including Latin American specialist Claudio Irigoyen.
Bitcoin could be used as an intermediary for cross-border transfer … Using bitcoin for remittances could potentially reduce transaction costs compared to traditional remittance channels.
Bitcoin’s volatility might be minimised, according to Bank of America experts, if exchanges between BTC and USD “happen automatically.”
Remittance fees would be reduced for financial intermediaries, providing receivers with greater spare income. “It is unknown how the bitcoin transaction fees will compare to existing remittance channels,” Bank of America said.
Second, according to the Bank of America analysis, “financial digitalization” might be a benefit because “more than 70% of the adult population in El Salvador does not have a bank account.” The analysts added, “democratising access to electronic payments through bitcoin has a progressive tou.”
Furthermore, adopting bitcoin as legal tender “gives consumers more choice,” according to Bank of America analysts, who added: “We disagree with the notion that it is coercive that businesses will be legally bound to accept bitcoin as a form of payment as long as they have the necessary technological infrastructure.”
They went on to say that payments can be converted to dollars automatically utilising Chivo, the government’s electronic wallet.
Finally, the report stated that bitcoin adoption might bring FDI into El Salvador from companies including Strike, bitcoin miners, and ATM manufacturers. At least two crypto ATM companies have already stated their intention to install crypt ATMs.
Despite some advantages, Bank of America feels that accepting bitcoin as legal tender in El Salvador will be detrimental in the long run, owing to the cryptocurrency’s significant volatility. Allowing people to pay taxes with a highly volatile asset is particularly concerning, according to the analysts, who warn that if the price falls, it could result in a sharp drop in revenue.