One Year Since El Salvador Announced Bitcoin Adoption
Successful transactions often depend on careful oversight and seamless communication with disparate parties and components. You can visit the official site here to know more information as to why is bitcoin accepted as the leading crypto coin among all. The world has been watching as El Salvador takes an increasingly leading role in the Bitcoin movement, with their adoption of the currency last September. This small country, with a population ranking 194th globally, is acting as a litmus test to see if people can use Bitcoin for e-commerce and global remittances.
While the world of commerce has grown accustomed to integrating Bitcoin into its operations, national laws remain a significant obstacle when trying to incorporate this new currency into international trade. This concept is often known as ‘remittance,’ where low-income nations have large populations working in wealthier nations and sending funds home regularly.
El Salvador’s involvement in Bitcoin has been sudden and dramatic – within just days after the financial technology (or fintech) was announced, citizens were using BTC to buy Amazon gift cards, food staples, and other goods. While this may seem like an extra effort for El Salvador citizens, it can be a boon to local economies.
The benefits of Bitcoin include cross-border transactions, which are fast and highly secure, with greater financial inclusion. While there is a lot of skepticism around the new digital currency, El Salvador is taking a positive approach to adopt the currency into their domestic markets.
Because the world of international remittance affects many people daily, we have compiled this executive briefing to provide insight into the problems that occur in this realm. We also give special attention to what El Salvador is doing differently than most nations and how it has opened up opportunities for Bitcoin adoption, especially regarding national issues such as financial inclusion.
The Benefits of Remittance
One of the essential aspects of remittances is that it aids financial inclusion. The World Bank reports that over a billion people live on less than $2 per day, half of which are in developing nations. This money can be significant for these people as it provides access to necessities – food, clothing, housing, and healthcare – which make life worth living.
When this money leaves home, though, it becomes a problem for many recipients who often have no access to banking services or other means of transferring funds. These financial barriers create situations where remittance comes with very high costs like fees and money transfer fees. World Bank has reported that the costs associated with remittances average 7% globally – much higher than expected in any other market.
It is no surprise that the same World Bank report explains that 90% of all remittances are done through informal channels. However, these informal channels come at a high cost to the receivers as well – money leaves the country and arrives with very high transaction fees, which have claimed billions of dollars in potential savings. It is a significant problem for many nations, as it hinders economic growth and stunts opportunities for reinvestment in local communities, and this is where bitcoin comes in.
When Bitcoin was founded, it was initially a response to the 2008 financial crisis and the collapse of the traditional banking system. Since then, it has gained a reputation as a secure means of storing wealth – with no need for intermediaries or mediators.
It is especially true for remittances, as these transactions often happen in high volumes with large amounts of money being sent back and forth – by eliminating banks and intermediaries, Bitcoin can make transactions faster and cheaper than ever.
Studies have proven that over 70% of remittance costs are related to bank charges, so reducing the number of intermediaries can save billions in potential savings each year. The remittance industry is worth 600 billion dollars, and with an ever-growing global market, there are more opportunities for Bitcoin to make its mark.
The Challenges of Remittance
Of course, with any international transaction, several challenges need to be overcome for these transactions to succeed. The first and most crucial challenge is the problem of fraud.
The financial sector generally has a long history of fraud, which The Center for Global Development has well documented. When dealing with millions or billions of dollars in transfers being sent across borders, there must be a great deal of protection from criminals. One way Bitcoin can help solve this problem is by removing corrupt actors from the equation, as it is free from third parties.
Bitcoin Boosting Job Opportunities in El Salvador:
This new era of technology that has swept the globe affects many people differently. While it is true that Bitcoin can dramatically improve the efficiency of financial systems, it is also true that Bitcoin helps create jobs and drive economic growth. This second concept is most important to countries like El Salvador – one of the fastest-growing economies in Central America. El Salvador has a formidable unemployment rate, with an official number hovering around 13%.
However, these statistics are often disputed since many citizens living below the poverty line cannot access banking services and become unemployed even though they still need a way to feed themselves and their families.
But with, bitcoin acceptance in the country has created numerous opportunities for youngsters as citizens can start their cryptocurrency exchange, set up a bitcoin mining plant, and join a cryptocurrency payment processor company as employers. With the recent decision to accept Bitcoin as a payment method, El Salvador could help thousands of young people find jobs.
Passing legislation that mandates the use of Bitcoin can profoundly affect the local economy as many citizens living in poverty will have more opportunities to get work. It is all because there are a lot of high-paying cryptocurrency jobs available such as blockchain developer, mining engineer, and others. In addition, these industries also provide job training for those with little education or experience, which can significantly benefit El Salvador’s unemployed youth.
The construction of bitcoin city in El Salvador:
The El Salvadoran government wants to build the first bitcoin city in the world. Bitcoin City is a project designed to attract bitcoin investors and businesses to take advantage of the benefits of cryptocurrency. The government will develop the project in Santa Ana and San Salvador, El Salvador.
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