Organized global protocols are essential to ensure that digital coins do not harm developing nations. Unless private and public sectors adopt vital reforms, these traditional banking alternatives would increasingly attract governments and individuals due to their low cost coupled with high risks.
Some market players view the BTC market as a winner and loser game, played by hedge funds, criminals, geeks, and amateur investors. Only those who know the game or fans that can absorb related dangers or mitigate them consider the high crypto risks associated with the market volatility. However, currently, BTC witnesses increase adoption by individuals and countries looking for an alternative conventional transaction system – those less equipped to mitigate the associated risks.
Some weeks ago, El Salvador accepted BTC as a legal tender. Residents in the country can use Bitcoin to pay for their services and goods. Salvadorians seem used to such monetary moves. For instance, the nation accepted the United States dollar as a legal tender in 2001. Citizens in El Salvador started utilizing the currency to complete their domestic transactions.
Using BTC as a legal currency will worsen the fiscal constraints revealed by dollarization. That is an absence of a sovereign macroeconomic-official policy to shape domestic protocols. Furthermore, BTC exceeds the dollar in volatility. For instance, the leading coins saw their value swinging from $32,463 to $40,993 from 8 to 15 June. Also, the coin’s value ranged between $34,259 and $49,304 for a month since May 15. With such wild market-driven changes, uncontrolled by policymakers, BTC proves unstable for macroeconomic stabilization.
The El Salvador head of state tweeted that BTC will enhance remittance transactions and reduce charges considerably. The fees incurred by migrants to send money home are high regardless of the G20 and UN’s calls to reduce them.
The president is correct about challenging the system by offering low-risk and low-cost transaction alternatives. However, Bitcoins seem like the wrong financial tool to accomplish that. Although the coin allows transfers globally and directly without intermediaries, their volatility restricts their usage. BTC can be unreliable as a store of wealth. Keep in mind that volatility remains a challenge in the crypto market.
Do you think that BTC can solve our financial problems? Comment below.