Bitcoin leads the other cryptocurrencies in the race to become adopted as a legal tender across the world. The world’s first cryptocurrency has now been legally adopted by South American country, El Salvador, as its legal tender. The nation set history in September by becoming the first nation to adopt Bitcoin.
Since then, the crypto community has hoped that other countries will join El Salvador to begin using Bitcoin for official transactions. While that could potentially happen, we are still a long way from that day when every country will officially accept cryptocurrencies for payments. Some of the most important individuals in finance have repeatedly made the assertion that Bitcoin is not fit as a legal tender.
Perhaps one of the biggest persons in the financial world, the Governor of the Bank of England (BoE), Andrew Bailey, has said that although Bitcoin is popular, its inherent volatility makes it an unsuitable asset to be used as an official tender in England. Bailey expressed his concern that El Salvador chose to accept Bitcoin as a legal tender.
He said that investors and others who transact using Bitcoin might be subject to inflation and its attendant risks.
Different Opinions on Bitcoin Adoption
Earlier in the year when the nation adopted Bitcoin, protests were held in some parts of the main city. Some residents quickly expressed doubts about the ability of Bitcoin to become a store of value when it faced fluctuating prices. Within a few days after the adoption was signed into law on September 7, Bitcoin hit a new all-time high before falling into a retracement.
The protests have been quelled, but some local and international commentators still hold reservations about Bitcoin being the nation’s official currency. One of them is Bailey.
Speaking at a recent public event at Cambridge University, Bailey said that he was shocked that any country would choose to make Bitcoin its official tender. He noted concerns about the seemingly low crypto literacy among El Salvadorans and asked if they understood the full implication of its volatility.
He then added that the apex bank is considering the adoption of central bank digital currencies (CBDCs). Although he didn’t expressly say it, Bailey seems to favor CBDCs over cryptos because they are government-backed, centralized, and have no volatility. His position agrees with the International Monetary Fund (IMF).
In June, following the announcement by El Salvador’s president, Nayib Bukele, that the country would adopt Bitcoin, the IMF issued a warning stating that the volatility of cryptocurrencies makes them unsuitable as payment methods. The IMF noted, though, that there is a “strong case” for digital assets.
The Bank of England has not said that it would ban or severely regulate cryptocurrencies in England, but it is possible that it would release some regulations to pave the way for its CBDC if it finally agrees to launch it. The world is gradually marching towards an economy that will be powered by digital assets.