On September 7, El Salvador became the first country to establish Bitcoin as legal tender, a move that generated enthusiasm among cryptocurrency advocates but concern from many other observers. We believe there are reasons to be concerned, but also see some positives, as noted below.
- Greater financial inclusion in a country where many do not have access to banks
- Lower remittance and payment processing costs
- Potential to attract business and tourism from the global cryptocurrency community
- Possible financial volatility
- Danger of easy capital flight
- Potential depletion of bank capital
- Environmental concerns tied to intense energy use
- Illegal use of cryptocurrency
El Salvador’s experiment will need to be closely monitored as its people gradually increase their use of Bitcoin.
For more details, read our Insights: El Salvador and Bitcoin