Elena Obukhova believes Bitcoin will be adopted en masse in Latin America
Following Elena Obukhova’s previous post on “Bitcoin as a Legitimate Merchant: What Does It Mean for All of Us?
Why is Bitcoin massively accepted in Latin America?
Latin America is a very special region where most of the countries have experienced many serious political and financial crises and the government has been unable to help the people. Various regulations and restrictions on foreign currencies, particularly the US dollar, have led to the rise of the monetary economy. People see cryptocurrencies, and Bitcoin in particular, as the only way to protect their savings from inflation and government spam.
In response to the question, Bitcoin is already part of the money economy and widely used by the people of Latin America, and now governments are turning it over to the public sector. Countries that do not maintain their national currencies and “secure” them from rising inflation can now adopt a currency regardless of their local policies. For example, El Salvador used the US dollar as its national currency. However, the US dollar does not meet the needs of the underserved, such as remittances. The money transfer market in Latin America is huge and cryptocurrencies allow deposits with low commissions compared to traditional money transfers.
The current efforts to introduce Bitcoin as legal tender seem quite plausible if one is familiar with the local market. Latin America was the leading region in Bitcoin adoption, it became widespread and is now only official.
What does the upcoming mass rollout of Bitcoin in Latin America mean for local businesses?
Elena Obukhova briefly mentioned how local businesses in Latin America are using Bitcoin. The existence of Bitcoin as legal tender makes all of these transactions completely legal and official. It also opens up the same seamless opportunity for other businesses that were previously unable to conduct informal transactions and faced high commissions, delays, and a regulatory nightmare for payments.
You also don’t need a dedicated POS machine to accept Bitcoin in your local business compared to the complexity of a bank card. So now anyone can pay and receive payments with Bitcoin, regardless of gender, race, financial status, residential status and everything else.
Local businesses are located in risky and dangerous areas, so you don’t have to worry about depositing money daily or even several times a day to avoid getting robbed. You can now store digital currencies with additional protection and easily avoid such incidents.
This assumption was caused by numerous crises and political actions. In 1982, for example, the ban on US dollar accounts and the conversion of pesos in Mexico caused an instant 30% loss for currency exchange account holders. Everyone had to lose and they will remember that.
Not only has Bitcoin protected funds from inflation, it has also opened new horizons for disadvantaged people as they can now easily conduct transactions using digital currency instead of cash. It also allows access to other financial products such as savings and loans that are inaccessible to the unsecured.
Local businesses also use Bitcoin and other cryptocurrencies for domestic and overseas transactions. The commission is much lower and the transaction speed is much faster than with a bank, especially for international transfers. Some countries have a lot of restrictions and unsecure regulations on cross-border payments, which creates additional problems for businesses because they simply cannot come to an agreement with buyers, sellers or partners. Cryptocurrencies solve this problem by making it easy for companies to trade with one another.
Assuming the developed world accepts Bitcoin as legal tender, there will be some big changes for local businesses as well. Have you ever tried to open a business account? For some it can be easy and for others it can be an absolute nightmare. Neobanks partially stepped into the game to change the rules, but there are still many factors irritating local businesses that cannot be eliminated, such as commissions, speed of transactions (bank transfers etc), exchange and exchange fees, POS, etc. Loans and corporate lending (even if small) can also be challenging. Cryptocurrencies are in the process of meeting these needs.
Which countries can accept Bitcoin first?
Elena Obukhova believes that Latin America will be the area that will stimulate the mass adoption of Bitcoin. She added that emerging markets in general are the ones that are easy to catch up and grow quickly. We could see Paraguay, Panama and Tanzania planning to join El Salvador. Mexico is also gaining more crypto advocates in the government. However, according to the controversial Fintech law of 2018, it is unlikely that Mexico will accept Bitcoin as quickly as other Latin American countries. Argentina would benefit from such a law being passed, and it is rumored that it is actually being considered. Especially when you consider how big the over-the-counter bitcoin market is in Argentina.
Africa is not surprising either. Nigeria, for example, has many interesting cash-based financial products for the shortcoming. However, cash has its limits and takes longer. Cryptocurrencies bring a lot of convenience and financial participation to the community.
Elena Obukhova personally believes that mass adoption is just a corner. If developing countries accept Bitcoin as legal tender, developed countries will now have to follow suit. When? I’m not sure yet, but the pace of discussions and joining El Salvador from other countries is enormous.
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