- The Bank of America listed four potential benefits with El Salvador’s adoption of Bitcoin as a legal tender.
- The bank explained that “using Bitcoin for remittances could potentially reduce transaction costs compared to traditional remittance channels.”
One of America’s largest financial institutions by assets, the Bank of America, said that El Salvador is poised to benefit from its decision to legalize Bitcoin as a legal tender. Analysts at the Bank of America stated the positive implications on El Salvador in a recently published report. According to the recent report, El Salvador’s foray into BTC could streamline remittances. The report also revealed that the BTC decision could help advance financial digitization in the country. Additionally, the analysts wrote that El Salvador adopting BTC as a legal tender could expose the country to American firms and digital miners sigh regards to foreign direct investment. Furthermore, consumers will have access to greater and multiple choices.
Analysts at the bank mentioned that remittances represent 24 percent of the country’s gross domestic product. The bank noted that a significant part of remittances goes into transaction fees.
Using Bitcoin for remittances could potentially reduce transaction costs compared to traditional remittance channels. The idea is that Bitcoin could be used as an intermediary for the cross-border transfer, so that dollars are converted to Bitcoin by the sender and then converted back to dollars domestically by the receiver.
The analysts further explained the result of using BTC to reduce transaction costs. The report showed that a more significant portion of each dollar received in El Salvador goes to the recipient. This increases citizens’ disposable income and limits the portion of remittance lost to financial intermediaries.
Bank of America highlights potential benefits as El Salvador adopts Bitcoin as legal tender
The Bank of America report also listed financial digitization as a benefit of the BTC legal adoption in El Salvador. The report noted that over 70 percent of the adult population in the country does not own a bank account. Hence, democratizing electronic payments with Bitcoin is a step forward for the people of El Salvador.
According to an image of the research posted by Diario El Salvador on Twitter, Bitcoin as a legal tender in El Salvador gives more choices to consumers. Also, the note said the decision shows that the country is embracing innovation. The Bank of America disagrees with the belief that businesses will be forced to allow BTC payment. The bank argued:
We disagree with the notion that it is coercive that businesses will be legally bound to accept Bitcoin as form of payment as long as they have the proper technological infrastructure. In this case, the seller/payee can automatically convert the payment to dollars using the electronic wallet (“Chivo”) which is linked to the clearinghouse (though transaction costs may apply).
Speaking further on the positive implications, the Bank of America mentioned the development could attract foreign direct investment (FDI) flows into El Salvador. The report said that El Salvador could see an inflow from Bitcoin miners, ATM manufacturers, and others.