Friday, December 9th, 2022

4 more countries will accept Bitcoin as legal tender

The imbalance of the modern financial system, the hegemony of the US dollar and the questionable policy of the Fed are forcing developing countries to look for their own special monetary path. According to Bitmex CEO Alex Heptner, by the end of next year there will already be five countries in the world with Bitcoin as the official currency.

Inflation

The main problem faced by developing countries is inflation. They supply energy resources and agricultural goods to foreign markets, but they buy goods with high added value in large volumes. To finance large projects, they are forced to borrow mainly in US dollars. And the market nature of the economy opens the door for international business, which squeezes out local producers and contributes to capital flight. All this leads to an increase in prices on the domestic market and the depreciation of the national currency.

Inflation in Russia, % (YoY)Inflation in Russia, % (YoY)

For example, official inflation in Russia is 7.4%, while the Central Bank of the Russian Federation continues to buy currency for 300 billion rubles a month, and prices in the domestic market are rising due to the active sale of products abroad. Thus, lumber has increased in price by more than 60% since the beginning of the year, and the volume of housing construction – by only 30%.

The most active importer of building materials this year is the United States, where lumber futures reached a five–fold growth at the peak. The Fed has printed more than $4 trillion this year, triggering a rapid economic recovery and increased demand for a number of products. The problem is that this money will primarily hit developing countries with inflation. Thus, the IMF forecasts inflation for 2021 for developed countries at 2.4%, and for developing countries – 5.4%.

Money transfers

In search of earnings, citizens of developing countries immigrate to Europe and the United States, while they regularly send part of their income to their homeland. According to the World Bank, low- and medium-GDP countries receive 75% of the total global remittances. However, payment systems still retain high fees, taking up to 10% of the transfer amount.

According to the President of El Salvador, the recognition of Bitcoin as an official currency is an effective way to reduce commission costs and financial burden for citizens. At the end of 2019, remittances to El Salvador amounted to 1/5 of GDP or $6 billion.

Global inflation is rising, and a number of developing countries are already experiencing it to the full. For example, in Turkey, its value has again reached 20%. Unfortunately, political motives often outweigh economic ones, so the same Turks were banned from making any payments in Bitcoin. However, with rising prices, new countries will appear that will choose the path of El Salvador and recognize Bitcoin as the official currency.