Bitcoin (BTC) is a new solution for the digitized world that can address some of the shortcomings of fiat currencies. This is why Bitcoin has started to be used for numerous use cases, which shows the great potential that this digital coin has. Bitcoin is an asset that could really change the entire global economy, and represent the future of money.
However, one aspect that hinders Bitcoin’s global adoption is its lack of support from governments worldwide. Still, this can change if Bitcoin starts to be seen as a legal tender, which means that businesses will need to accept this form of payment, as imposed by the law. In this way, Bitcoin could serve as a payment method alongside the other coins a country has. We already have a country, El Salvador, which has accepted BTC as a legal tender, and as a result, it is a victory for Bitcoin, and it can act as a source of inspiration for others.
Accepting Bitcoin as a legal tender is a long process, and governments should research this idea to ensure it is the best solution for their country. They should pay attention to the BTC price prediction, the history of Bitcoin, and, why not, what occurred with El Salvador after accepting BTC.
In this article, we will explore the pros and cons of Bitcoin as a legal tender. But first, let’s start with the similarities and differences of fiat money compared with Bitcoin.
Bitcoin vs fiat money: What are the main discrepancies between them?
Fiat currencies are supported by the governments of many countries worldwide. Central banks or governments also maintain their value. They are centralized and normally controlled by a central bank, or in the case of the USA, by the Federal Reserve. Because of this approach, the one in control is the government and not individuals. Unfortunately, fiat money is subject to many problems, including high inflation, which can also lead to financial crises.
This is why people sought solutions to address the various financial challenges. Bitcoin emerged at a time when the world was facing an economic crisis. Bitcoin is a decentralized asset, meaning no authority or government controls it. Bitcoin has a fixed supply, so once it reaches its limit, new BTC will no longer be issued. This brings a scarcity value, and it can actually act as a hedge against inflation.
Additionally, the government has no role in creating new Bitcoins, making BTC nearly immune to government influence. The government can only ban or allow people to use it.
The advantages of accepting Bitcoin as a legal tender
Be free from censorship
Bitcoin is a decentralized asset, which means that accepting it as a legal tender means being free from censorship. Decentralization is the key feature that has made Bitcoin so popular and created significant waves around the world. Decentralization removes the need for intermediaries, and as a result, Bitcoin doesn’t need government or central authorities to function properly. Instead, new blocks are added through a process called mining, where miners validate transactions and make Bitcoin continue to function.
Bitcoin transactions are transparent, so anyone can check any payment that has occurred on the blockchain. Other than this, transactions can’t be modified once they are added to the blockchain.
Bitcoin payments are faster and don’t have high fees
Another great advantage of Bitcoin is that it works faster than payments with fiat money. For example, transactions with BTC are sent within minutes, which doesn’t work with fiat money in all scenarios. Bitcoin is a good idea for many payments, but especially for the remittance landscape, as it has lower transaction fees compared with fiat currencies. So, Bitcoin can be used for remittances to keep a higher amount of money.
Bitcoin can act as a hedge against inflation
Bitcoin is also a great tool for protecting against inflation and thriving in this market. Bitcoin has a fixed supply of 21 million coins, meaning that once this capped volume is reached, it will no longer be able to issue new coins.
Many processes maintain the scarcity of Bitcoin. For example, Bitcoin halving is a good example of this kind. This event halves the amount of BTC miners receive after validating transactions and adding new digital coins to the blockchain. Because Bitcoin is a scarce asset, this scarcity helps maintain its high value, as people wish to hold something that will cease to exist in the future.
The disadvantages of accepting Bitcoin as a legal tender
Not having a clear regulatory framework
Not having a clear regulatory framework is one of the main disadvantages of accepting Bitcoin as a legal tender. Since Bitcoin operates independently of government involvement, some countries may be reluctant to integrate BTC as a payment solution. If Bitcoin becomes a legal tender, this also means that countries will need to put in place a robust crypto tax system. And since Bitcoin payments are private and anonymous, it is very challenging to track the activities regarding BTC transactions.
Volatility
Another significant disadvantage of Bitcoin is its high volatility, which causes its price to fluctuate significantly. As a result of this, the price of BTC can rise and then suddenly drop in a matter of hours. This is why, as a legal tender, Bitcoin will also be quite an unstable option, taking into account the speculative nature of this asset.
Last remarks
The path of Bitcoin to become a legal tender in numerous countries is a journey filled with obstacles. This is why, besides taking this huge step, it is important to consider both the advantages and disadvantages, to prepare better for what the future might bring.
Bitcoin has come a long way since its inception, evolving from a coin primarily suited for tech-savvy individuals to one that is now attracting the attention of a broader audience.
