Bank of America provided unexpected support to the El Salvadorian government, which introduced Bitcoin into its financial system. One of the largest US banks believed that Bitcoin could help develop the financial structure of the state.
One of the giants of the financial world sees BTC as an excellent opportunity for the development of the economy of El Salvador; since at the moment local banks simply cannot provide a full range of their services to the population.
According to the bank, the introduction of Bitcoin is likely to reduce the cost of monetary transactions. As you know, they account for almost a quarter of the country’s GDP.
That is, many Salvadorans work in other countries, send money home and thereby provide serious support to the local economy. True, the process itself is quite expensive for them: a cross-border transaction to El Salvador through banks has total costs in the form of commissions of up to 10 percent of the transfer itself. Thus, up to 2.4 percent of the country’s GDP lost on the very service of transfers.
Bitcoin as an alternative option for sending money could streamline the process described above, bankers say. The use of Bitcoin for money transfers can reduce the cost of their service compared to traditional payment channels.
In addition, it can help increase the disposable income of citizens of the country.
Democratization of financial services
Banking for citizens who not associated with the services of banking institutions considered as another advantage of the introduction of a leading cryptocurrency asset. According to statistics, at least 70% of the country’s residents still do not have access to bank accounts.
In addition, the state may well attract foreign direct investment, and become a regional center for mining cryptocurrencies, like in Iceland. It is worth noting that back in March, Bank of America released a fairly categorical report on cryptocurrencies.
It reported that Bitcoin can only be used to speculate on the value of an asset, no more. The bank has now softened its rhetoric a bit.
Bitcoin law was received with skepticism
In the global financial system, the government of El Salvador’s experiment with Bitcoin has been met with controversy. A law prompted by President Nayib Bukele introduces Bitcoin as legal tender.
After the President made Bitcoin an official means of payment, it became very popular in the cryptocurrency community. However, Nayib Bukele then often criticized by experts and the residents of the country themselves.
The IMF also began to express critical assessments, although its position in this case is understandable. In turn, the rating agency Moodys downgraded the state’s rating, including due to the fact that Bitcoin threatened negotiations with the IMF.
The Salvadorans themselves are also quite skeptical about the government’s decision. Some representatives of local small businesses have repeatedly stated that they simply don’t have the necessary infrastructure to accept BTC as payment for their goods and services. However, we believe that it is only a matter of time; the acceptance of Bitcoin will really attract cryptocurrency lovers and new firms to the country; which will create the appropriate tools for working with cryptocurrency.
Perhaps, after the statement of Bank of America, the attitude towards the President of El Salvador will change for the better, as well as towards the BTC cryptocurrency itself.