A report from the Bank of America lists some potential benefits for El Salvador as it works to implement bitcoin into its economy.
An analyst from the Bank of America said that El Salvador’s decision to adopt bitcoin was correct in an economic outlook report. The official government Twitter profile of El Salvador posted a screenshot of a report from the Bank of America, pointing to the aforementioned statement of approval.
The report, released on July 26, talks about the overall economic viewpoint of El Salvador, and the section in question talks extensively about the opportunities in remittances, digitization, and business operations. The author believes that bitcoin’s adoption can help with all of these aspects of the economy.
It notes that remittances form a substantial part of the country’s GDP, at 24%. Bitcoin is well known for its ability to reduce costs, and using it as an intermediary for cross-border transactions could save a great deal of money there. This would give citizens a greater share of each dollar that is transmitted.
Perhaps most importantly, the report states that most El Salvadorians lack a bank account — more than 70% — so a bitcoin-based system would pull them into the economy. This is one of the most touted benefits of cryptocurrency, i.e., banking the unbanked, so that digitization could benefit greatly.
When it comes to the larger picture, the author says that bitcoin adoption could drive FDI flows into the country, including from payments platforms, bitcoin miners, ATM manufacturers, et al. This could boost the country’s growth in the long run, while it also seeks to attract entrepreneurs to do the same.
Authorities continue to doubt El Salvador’s decision
While El Salvador has been resolutely moving ahead with its plans to implement bitcoin into the economy, some prominent figures both within and outside the country are questioning the decision. Making bitcoin legal tender is a big change for a country and is an unprecedented development that could have an enormous impact, both good and bad.
The International Monetary Fund has said that the decision comes with a host of macroeconomic and legal issues. In contrast, the finance minister of the country stated that it brought many challenges. But President Bukele has taken steps to ensure that bitcoin is adopted as quickly as possible, with a wallet set for launch in September.
The government is also planning to use volcanic energy to support the mining industry. This is a somewhat ambitious plan, and there have been no updates yet, but it signals the strong intention from the ruling government.