Why are developing countries accepting Bitcoin as legal tender?

The World Bank report points to an increase in the number of people living in absolute poverty over the past three years. This means more and more people are living on no more than $1.90 a day. The Covid-19 pandemic has particularly worsened poverty rates in most developing countries. Other factors are climate change, global conflicts and runaway inflation. For more information:

Poverty has been steadily declining over the past few years until the global pandemic reversed that trend. In addition, between 75 and 95 million people may face new economic challenges in the coming years, especially in developing countries.

In the post-pandemic era, developing countries have faced many challenges, including rising unemployment, high crime rates, corruption and political instability. And these problems have further increased the level of poverty. Therefore, citizens do not have the opportunity to improve their lives. Some are not even able to financially support their family or loved ones.

The challenges facing developing countries are forcing more and more citizens to seek green pastures in developed countries. Others have turned to platforms to buy and sell cryptocurrencies to make a profit.

The potential benefits have made this crypto asset popular in developing countries. Some experts argue that Bitcoin can help fight the growing poverty in these regions. Indeed, it can help people get a new source of income, and governments can use it to revitalize their economies instead of using an unstable fiat currency.

Bitcoin as legal tender

Several developing countries have adopted Bitcoin as legal tender. For example, El Salvador shocked the world by adopting bitcoin as legal tender in 2021. In addition, this country holds bitcoins as a reserve on its balance sheet. This unexpected move has allowed governments around the world to consider cryptocurrency as legal tender. Another developing country, the Central African Republic, has joined the bandwagon in making bitcoin legal tender.

After El Salvador’s decision, the country’s president invited central banks and monetary authorities of other countries to take part in the bitcoin conference, which was dominated by representatives of African countries. The meeting focused on the digital economy, expanding access to financial services and non-banking banking services. Representatives also discussed the benefits of Bitcoin and its deployment in El Salvador.

However, developing countries have issues that hinder the rapid adoption of cryptocurrencies as legal tender, including corruption, distrust, and lack of infrastructure. Some reports indicate that several countries have banned cryptocurrencies, while others have vague rules.

Why do developing countries consider bitcoin legal tender?

Turning a country into using bitcoin as legal tender is not easy. However, two countries have already taken the plunge and say the future looks bright. Most developing countries can reap significant benefits from adopting cryptocurrencies. The crypto ecosystem has many benefits that can help increase their overall GDP and fight poverty.

For example, Satoshi Nakamoto created Bitcoin to help unbanked people. In developing countries, more than 50% of the population does not have access to basic financial services or banking infrastructure. Blockchain technology and the spread of bitcoin in these countries can help people participate in the global financial ecosystem. Indeed, they will allow them to access fast and inexpensive digital money that they can spend anywhere.

The decentralized financial ecosystem allows people who do not have a bank account to receive loans, down payments and savings accounts. In this way, these people can access credit faster and even create passive income. Some blockchain-based charities and platforms are partnering with developing countries to make cryptocurrency accessible and use it to solve their economic problems.

In addition, Bitcoin can act as a hedge against inflation. Cryptocurrency has a limited maximum supply, which makes it deflationary. While the crypto sector is struggling with volatility, Bitcoin can help deal with hyperinflation in Third World countries.

Final Thoughts

Bitcoin can benefit developing countries in many ways. This can help people with underbanked and unbanked access to financial services, including credit. Also, people in these countries can use bitcoin to earn passive income. However, these countries must overcome the difficulties that prevent some people and governments from accepting cryptocurrencies.

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