Is Bitcoin suitable to become legal tender?

[Konfusioon]

Recently El Salvador adopted Bitcoin as legal tender. Some sources report that other Latin-American countries are planning to follow suit [1]. I personally feel that Bitcoin is not suitable currency for most types of countries that (potentially) want to adopt it. The success or failure of some countries to adopt any form of cryptocurrency will no doubt have big implications for others to follow.

The main reason I made this post is not to bash Bitcoin but so that others here could potentially shine light to the flaws in my reasoning.

First off I don´t think that El Salvador or others have the necessary infrastructure present to support transactions in crypto. Research shows that the precent of population using internet in El Salvador is roughly 30-40% [2]. This obviously means that 60-70% don´t have access to necessary prerequisite for crypto. Likewise for crypto to function as a useful legal tender, a country needs to have high level of internet availability. This is not likely the case for most countries looking to adopt it.

Secondly I don´t think that most countries have the necessary financial education to support Bitcoin as legal tender. There are some statistics that show that a shockingly small number of people even in developed countries have the necessary skill-set to even keep a balanced budget [3]. As an investment option crypto is risky. I believe I´ve seen it said on this very forum that most of crypto traders lose money. As a currency it is definitely harder to plan around than regular money specially due to Bitcoins volaitility.

Thirdly and related to second point is the fact that trading in Bitcoin can be more prone to scammers due to the fully digital nature of the currency and also due to the fact that this currency does not have a safety net provided (albeit at times poorly) by regular banks. I think that safety measures taken by some people in this forum shows nicely how well aware in cyber security one must be to feel safe around crypto. I myself have probably had at least three mini-strokes fearing that I might have sent a substantial amount of money to a wrong address. It´s a problem that is not as substantial with FIAT currencies.

So why is all this important? One can easily say that there is no harm if people have the option to either use crypto as currency but also the freedom to not use it if they so choose. I believe that at least for a time being we will be hearing bad news from El Salvadors crypto experiment. By that I mean of people losing their savings, being scammed out of money and generally having the infrastructure fail. We have one such example already [4]. This will likely create caution for other trying to follow in El Salvadors footsteps. This might have devastating implications for crypto however. Looking back in time people still bring out Chernobyl to this day to justify not using nuclear energy.


[1] https://theconversation.com/bitcoin-is-now-legal-tender-in-el-salvador-heres-what-that-means-167099
[2] https://www.statista.com/statistics/1055468/internet-penetration-el-salvador/
[3] https://www.prnewswire.com/news-releases/3-financial-literacy-statistics-that-need-to-change-in-2021-301246352.html
[4] https://www.reuters.com/technology/el-salvadors-bitcoin-digital-wallet-beset-by-technical-glitches-2021-09-10/

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[zanezane]

I don't see any harm using bitcoin as a legal tender besides the fact that bitcoin might've come from illegal activities and was used so they can disposed of it immediately. Other than that, I don't think that there's nothing bad having bitcoin as a legal tender.

[mrongoz_imut]

whether bitcoin is suitable to be a legal tender, in my personal opinion it is not suitable for us to make bitcoin a legal tender, even though el salvador has made bitcoin a legal tender, but my little heart can't accept all of that, because I'm afraid , if bitcoin has been made a legal tender, the price of bitcoin will fall, and getting a profit in investing takes a very long time.

[Konfusioon]

whether bitcoin is suitable to be a legal tender, in my personal opinion it is not suitable for us to make bitcoin a legal tender, even though el salvador has made bitcoin a legal tender, but my little heart can't accept all of that, because I'm afraid , if bitcoin has been made a legal tender, the price of bitcoin will fall, and getting a profit in investing takes a very long time.

Can you explain why having Bitcoin as legal tender means that the price of Bitcoin will fall? I would assume that the supply of Bitcoin remains largely stable while the demand for it would increase, so it would make sense at least to me that the price would also rise (though I do concede that it was not the case with El Salvador)

[ropyu1978]

Is bitcoin suitable as a legal tender, in my personal opinion, it is not suitable if we make bitcoin a legal tender, because only countries with weak currencies will allow the use of bit coins as a substitute for legal payments. And when citizens change their means of payment, their sovereignty will be lost and the currency will be weaker. With the exception of countries producing prohibited objects, they definitely want to make transactions using this bit coin

[glendall]

bitcoin being a legal tender I think it will harm the country itself, especially if it is a developed country, where the currency of one country will look useless because in terms of value it is far away, it takes 47K usdt to have 1 BTC, so it can be said that bitcoin is not suitable if used as a means of payment

[ranochigo]

Making a currency a legal tender doesn't necessarily means that the citizens HAVE to use it, it is merely a currency that the country recognizes and endorses. Fiat would probably still be a more dominant currency in use, and governments wouldn't give up their fiat for that. The problem isn't with how the citizens manage their financials but it is about how the volatility affects the user dis-proportionally. As for the point about transaction finality, it is hardly a case to be concerned about; you are responsible for your own funds and no one has to babysit them.

But again, any country recognizing it as a legal tender has an ulterior motive. That is to generate positive PR and distract others from the issues that they're facing. It is hardly a point to argue about.

[pinggoki]

As of now the main use for bitcoin with ties to being a bona fide currency is as an auxiliary payment method for when cash and digital payments thru fiat just wouldn't cut it. It makes sense to doubt bitcoin's viability right now considering the majority of the planet still has no idea of what a bitcoin is and how to acquire one. But as time goes by and as more and more places gain access to the internet, this will easily be upturned and would even hasten the adoption process for bitcoin.

bitcoin being a legal tender I think it will harm the country itself, especially if it is a developed country, where the currency of one country will look useless because in terms of value it is far away, it takes 47K usdt to have 1 BTC, so it can be said that bitcoin is not suitable if used as a means of payment

This is if a country takes a drastic turn and decides to use bitcoin over their own currency in a whim, which is hardly ever going to happen to any country as long as their leader is of course someone with half a brain and enough comprehension that adoption is a gradual process. AFAIK El Salvador's move is alright and should not cause the country any issues in terms of currency usage as they will still allow fiat operations within their territory.

[Dhaniii]

it is up to the particular country to make bitcoin a legal tender. because each country has its own laws to protect the legal medium of exchange that has been in use for a long time. so to make bitcoin a legal medium of exchange, of course, it takes a lot of approval from the government itself. I think that if bitcoin is used as a legal medium of exchange and replaces fiat money, it is very risky for inflation to occur in a country. because bitcoin often has ups and downs against market prices.

[DdmrDdmr]

Statista’s data is roughly the same as World Bank’s data for 2019’s Internet penetration, but it seems that it has since picked traction at a fast pace, and by beginning of 2021, it reached 50,5% of the population (+14,7% in a year). I figure the build-up to the Bitcoin Law may increase these figures sharply – we’ll see: https://datareportal.com/reports/digital-2021-el-salvador

Going over the full stats, it’s interesting to see that, for El Salvador:

 30,4% has an account with a bank institution.
  5,7% has a credit card.
  3,5% has a mobile money account.
 
Besides the degree of internet penetration, managing some kind of e-money is not that wide spread. Both will likely rise now substantially, albeit there being a delay between the population’s current foundations, and how widespread the Bitcoin Law intends to be.

There’s logically a learning curve both to use the technology, and shielding from scams, that is going to take a while to overcome, and we’ll hear all sorts of stories on user experience in this sense. It’s a bold/wild bet that we need to see how it eventually plays through.

[Konfusioon]

Statista’s data is roughly the same as World Bank’s data for 2019’s Internet penetration, but it seems that it has since picked traction at a fast pace, and by beginning of 2021, it reached 50,5% of the population (+14,7% in a year). I figure the build-up to the Bitcoin Law may increase these figures sharply – we’ll see: https://datareportal.com/reports/digital-2021-el-salvador

Going over the full stats, it’s interesting to see that, for El Salvador:

 30,4% has an account with a bank institution.
  5,7% has a credit card.
  3,5% has a mobile money account.
 
Besides the degree of internet penetration, managing some kind of e-money is not that wide spread. Both will likely rise now substantially, albeit there being a delay between the population’s current foundations, and how widespread the Bitcoin Law intends to be.

There’s logically a learning curve both to use the technology, and shielding from scams, that is going to take a while to overcome, and we’ll hear all sorts of stories on user experience in this sense. It’s a bold/wild bet that we need to see how it eventually plays through.

This is actually a very fascinating statistics. In a way it means that many El Salvadorians might skip the central bank state entirely. Going forward it might mean that in El Salvador the legitimate alternative to cash trading is using Bitcoin instead of regular banks. It will be interesting to see how this plays out as well. I do believe there is a lot of "getting used to" money that does not exist in the physical world (like with using electronic bank cards for payment)

[The Cryptovator]

If the government introduces something, do you think all the population of the country will welcome and use it? I don't think so. A country has multiple mobile financial services. Is all the population of that country using that? Or a person has been using all the services? No, I don't think so. Same even all the population has the ability to use Bitcoin they wouldn't use it. All population interests wouldn't be the same as well. But it won't prevent Bitcoin become a legal tender. It's true when any other country intends to legalize Bitcoin same as El Salvador, then most likely they will take a deep look at El Salvador to understand reality. So a negative impact from El Salvador would prevent Bitcoin adaption too.

[Tumanggor]

whether bitcoin is suitable to be a legal tender, in my personal opinion it is not suitable for us to make bitcoin a legal tender, even though el salvador has made bitcoin a legal tender, but my little heart can't accept all of that, because I'm afraid , if bitcoin has been made a legal tender, the price of bitcoin will fall, and getting a profit in investing takes a very long time.

everyone must think so (the high price volatility in bitcoin that makes bitcoin unsuitable for legal tender)
but for the long term, I see Bitcoin is very suitable to be a legal tender

so far our brains are still indoctrinated with a legal means of payment that must have a stable price but the emergence of bitcoin changes our view turning 180%

for now, there are still many who think that Bitcoin is not suitable as a legal tender but I believe that over time, everyone can accept bitcoin as a legal tender

[dupee419]

To those countries who are trying to follow El Salvador and them making Bitcoin as a legal tender, I'm pretty sure that these countries would make such better decisions because of the errors of El Salvador, with such an early stage, I was also expecting that there would be issues such as the lack of knowledge around Bitcoin, it can't be easy for someone new to crypto to just simply get the hang of it right away. On the other hand, I think Bitcoin as a legal tender is no problem really, it's just that we can't expect that the citizens would switch right away, good keypoints OP, but for me, in this early stage, we can just wait and observe more on how the government of El Salvador manage this.

[Darker45]

I am generally in agreement. However, we are not given many choices. There are only two questions that matter here. One is the exact question that you've raised. The other is: Is fiat suitable to become legal tender?

To your question, the answer may be a no. But to the other question, the answer is a definite and outright no. So whatever it is that makes Bitcoin unsuitable as a legal tender is not as insurmountable as fiat's.

[DdmrDdmr]

<...>

That’s a bit in the line of Bukele’s thought, to some extent:

(translated from Spanish)

1.1 million Salvadorians already use @chivowallet (and we haven’t yet made it available to 65% of phone models).

It seems that we’ll be able to bank more people in one month, that nationalizations and privatizations of the traditional bank managed in 40 years.

https://twitter.com/nayibbukele/status/1439062924534943753

The second phrase denotes the speed of things in relation to traditional banking in the country. It also denotes the lack of a proper term to reference providing access to its citizens to BTC/USD through Chivo. He used the term "bancarizar" (to bank). How about Chivo Civilization – small joke here..

That’s one of the important arguments in favour of bitcoin often used, and here we may well see how banks are given a skip by many that initiate their transition to modern era digital money.

[fiulpro]

Making bitcoins a legal tender is honestly inevitable for sure, people are using it on a very big scale now a days, I know even if it's 40% of the population but the fact is, if you do look at those numbers, it's already a lot, therefore you have to understand the fact that these things needs time and good management.
The government needs to monitor it closely since they could honestly destroy the reputation of the whole crypto community, people would definitely have problems, there would be even more scammers involved, but it's the same thing for the banks and fiats as well, at the end of the day what's important is to realize that, bitcoins is just a tool, how it's used and how it's portrayed is honestly dependent on the people itself. All the government could do is to give them a complete freedom to use it and to protect their assets legally as well, which I do think is a very good move, even if it does bring some probelms, it's something essential for the future and there are no problems that can't be solved, are there.

[BIT-BENDER]

I don't see any harm using bitcoin as a legal tender besides the fact that bitcoin might've come from illegal activities and was used so they can disposed of it immediately. Other than that, I don't think that there's nothing bad having bitcoin as a legal tender.

Government looting a country and taking it to another country is an example of illegal Fiat gotten money but still it's acceptable as a legal tender, so if same bad examples uses crypto-currency, it shouldn't be a legal tender why? I don't see any reason that makes Fiat acceptable as a legal tender and crypto-currency not acceptable, except for government trying not too undervalue their currency if Bitcoin or any crypto-currency becomes a legal tender. I will be willing to take a survey or count amongst students and workers in my area about if crypto-currency should be accepted, I will make a post if I can successful pull it off.

[hatshepsut93]

This will likely create caution for other trying to follow in El Salvadors footsteps. This might have devastating implications for crypto however. Looking back in time people still bring out Chernobyl to this day to justify not using nuclear energy.

I think as long as Bitcoin is not causing harm to the economy, which it shouldn't, people in the future shouldn't be too opposed to making Bitcoin a legal tender, like in your analogy with nuclear energy. But people might just say that it's not worth the effort if the example of El Salvador will show a very low adoption.

I think Bitcoin's success doesn't rely and shouldn't rely on governments supporting it. That would obviously be against Bitcoin's purpose.

[Fesatmas]

Indeed, this has been thought about for a long time and is quite an interesting opinion. On the one hand, as a legal payment tool, it has received support from various parties, both Bitcoiners themselves and from the government, who are tired of the inflation rate of fiat currencies. But on the other hand, as you said, the difficulty level of internet access and the ownership factor will be an obstacle if Bitcoin is made the only currency of the country.

Therefore, Bitcoin in some countries is only an investment alternative that is aligned with gold and stocks. I think it's much better, because if in the future we make Bitcoin the only means of payment in a country, it will certainly trigger the price value of paying a piece of bread = 5000 sat. What about shipping and costs?
El Salvador has two options, so don't worry, we still see that El Salvador with two options, one of which is Bitcoin, of course the residents there are free to choose.