In 2021, the President of El Salvador proposed accepting Bitcoin as legal tender in the country. bill aimed to introduce Bitcoin as fiat currency for use in daily activities. Later, in June, he passed the law in the Salvadoran Congress, where 62 of 84 members voted in favor of the bill.
news that El Salvador uses cryptocurrencies has been going on for more than a week, prompting other countries like Paraguay to take the course. Although Paraguay’s plan is not to convert Bitcoin into legal tender, they have nonetheless shown interest in the asset.
Since then, there have been many predictions about the impact of the El Salvador move. main question remains, will the approval of the Salvadoran government have any effect on cryptocurrencies? Yes! El Salvador’s involvement with cryptocurrencies could lead the world to adopt central bank digital currency platforms.
Furthermore, government support for cryptocurrencies is a big step towards the adoption of mainstream cryptocurrencies. With that in mind, this guide will discuss how government support can send crypto into the mainstream.
Ending legal barriers will speed up adoption
One of the major issues holding back the traditional adoption of crypto assets in many nations globally is the national and international regulations in place for crypto assets. Today, many countries around the world have banned encryption and its use, citing many different issues.
countries include Bolivia, Bangladesh, Iran, Nepal, Thailand, and Ecuador. Most countries do not accept any activity related to cryptocurrencies, while some have only banned the use of cryptocurrencies as currency. Also, other countries in the world have banned some cryptocurrency-related platforms such as Binance Exchange.
For example, US authorities have banned the global Binance exchange on charges of engaging in illegal activities. Subsequently, Binance introduced a new platform, Binance US, which followed all the American guidelines. However, only 43 states accept Binance services in the US, excluding Hawaii, New York, Texas, Connecticut, New York, Vermont, Louisiana, and Idaho.
Legal barriers in such countries have been a significant factor discouraging the growth and adoption of cryptocurrencies globally. However, once cryptocurrencies are accepted nationally in as many countries as possible, that would spell the end of mounting legal barriers. end of legal barriers will help send crypto assets to widespread and deep adoption.
If countries lower their sanctions and find a way to support cryptocurrencies, the adoption of traditional cryptocurrencies would accelerate.
Greater knowledge and understanding of cryptocurrencies
Today, the number of people with knowledge of the world of cryptocurrencies is increasing, but very few people have heard of or used them. However, recent statistics show that at least 100 million wallets have used cryptocurrencies at some point, which is close to the number of cryptocurrency users being 100 million or more.
Even if the number of wallets is 68 million, the number of users is much less as many cryptocurrency investors have multiple wallets. refore, the estimated number of current cryptocurrency users could be 40 million or even less. Consequently, knowledge of cryptocurrencies is still lagging behind.
However, once global governments embrace cryptocurrencies and start using them as their daily currency, the knowledge of cryptocurrencies will increase rapidly. Also, when the government adopts cryptocurrencies, it will establish ways to educate average users about the use of cryptocurrencies. Hence, even the smallest investors will gain extensive knowledge of cryptocurrencies. Once everyone is educated, the traditional global adoption of cryptocurrencies will accelerate rapidly.
Government acceptance builds trust
Currently, due to the lack of government support for cryptocurrencies, there is a lack of confidence in assets such as Bitcoin and Ether. Most investors have chosen not to invest for fear that cryptocurrencies are unreliable. Some still consider many crypto assets to be scams.
Even the best financial analysts and investment experts still see cryptocurrencies as a bubble that can burst at any moment. Identifying cryptocurrencies with such a definition makes even small-scale traders and the general world population be careful not to invest in cryptocurrencies.
However, once governments globally accept cryptocurrencies as a payment method, trust in cryptocurrencies will increase. Investors will start to notice the investment prospects of cryptocurrencies and also the possibility of using them as currencies. As trust grows, the adoption of traditional cryptocurrency will be inevitable.
Government support leads to institutional adoption
lack of government support also prevents large institutions, both financial and non-financial, from using cryptocurrencies. Also, many institutions fear partnering with cryptocurrencies because they fear being part of any crypto-related illegality.
However, once the government supports or accepts cryptocurrencies as legal tender or investment stocks globally, most banking institutions will become interested in cryptocurrencies. If a banking institution in a country starts accepting cryptocurrencies, clients will request the same services from other banking institutions, eventually sending viral and conventional cryptocurrencies.
Non-financial institutions such as hospitals, schools, shopping centers and many others will also take the course, making cryptocurrency an everyday asset, fully achieving traditional adoption.
Higher utility means higher adoption
Once cryptocurrencies are accepted by governments, they will have a greater utility in local and international exchanges. Merchants doing import and export business will prefer to use cryptocurrencies because cryptocurrency transactions are favorable and are not subject to jurisdictions.
Use on international exchanges will increase utility, leading to cryptocurrencies being adopted into the mainstream.
Considering the recent move by the Salvadoran government, there is a lot of speculation about the possible impact of government support on cryptocurrencies. However, the truth is that if governments started backing cryptocurrencies, assets like Bitcoin and Ethereum would become commonplace very quickly.
First, governments would end the many barriers placed against cryptocurrencies and make it easier for crypto platforms and assets to complete their businesses. Furthermore, most governments will institute policies to train their citizens in the basics of cryptocurrencies, thus increasing the level of knowledge of cryptocurrencies. Increased trust, institutional adoption, and public services would also increase the chances of cryptocurrencies becoming cryptocurrencies.
In the long term, governments will begin to take advantage of central bank digital currency systems that will transform the financial world into a fully digital future.
Wayne is a Blockchain enthusiast and cryptocurrency trading expert. Currently, he deals with trending topics in digital currencies.
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