After El Salvador, Which Countries in Latin America Are Most Likely to Adopt Bitcoin?

On June 9, El Salvador successfully approved a proposal to make Bitcoin a legal tender, becoming the first sovereign country to adopt Bitcoin as legal tender. This event was also listed by AFP as the 14th major event in the history of currency. According to the bill, after Bitcoin becomes legal tender, commodity prices can be expressed in Bitcoin, and any economic entity must accept Bitcoin as payment; Bitcoin transactions will not be subject to capital gains tax and can be used to pay taxes.

El Salvador is a coastal country located in the north of Central America, with a land area of ​​only about 20,000 square kilometers and 14 provinces. The country has a total population of about 6.7 million, but there are many domestic gangs. In the first half of 2015, nearly 3,400 people were murdered, although the president had announced a major crackdown on street gangs at the time. These were basically due to the fact that El Salvador had been colonized many times, and civil wars broke out frequently afterwards, resulting in unstable social security.

Economically, El Salvador is dominated by agriculture, mainly producing coffee beans and cotton, with a weak industrial base. It is one of the "low-middle-income countries" in the world, and has no sovereign currency, and has always relied on the US dollar for settlement. After the global financial crisis in 2018, since the United States adopted a quantitative easing policy, El Salvador has been mired in inflation, which is also the main reason for its active embrace of Bitcoin.

In addition to El Salvador, many countries in Latin America have the same experience. Unlike developed countries, which focus more on the beauty of code and are committed to building more anonymous algorithms and sophisticated community governance structures, these third world countries expect cryptocurrencies to have stable value measurement, storage value, and the right to maintain purchasing power and not be deprived. In addition, Bitcoin and blockchain have brought them a series of fast and low-cost financial services that were originally difficult to obtain.

PANews will take stock of which countries in Latin America are most likely to adopt Bitcoin after El Salvador.

Central America

1. Panama

Panama is the southernmost country in Central America, with a total area of ​​about 76,000 square kilometers and a population of more than 4.3 million. The Panama Canal, which connects the Atlantic and Pacific Oceans, has an important strategic position and is the dividing line between South America and North America.

Given its important geographical location, the focus of Panama's economy is the service industry, mainly finance, trade and tourism. Among them, the financial industry and re-export trade are well developed and play an important role in the economy. In addition, Panama has used the US dollar as its currency since 1907. Its national currency is the Balboa, which is equivalent to the US dollar and is used in the country at the same time. It is the first country in the world to use the US dollar as its legal currency except the United States.

After El Salvador proposed a bill to adopt Bitcoin as legal tender, Panamanian Congressman Gabriel Silva tweeted that Panama cannot fall behind. If it wants to become a true technology and entrepreneurship center, Panama must support cryptocurrencies and will prepare a proposal for Congress.

Earlier, Panama's Vice President Rolando Rodríguez had proposed a draft bill to regulate Panama's cryptocurrencies in the legislative plenary session to regulate the use and trading of cryptocurrencies in Panama, and also strive to include cryptocurrencies in the state-supported social security fund to give financial freedom to all Panamanians who cannot use common banking services. Rodríguez also said that Panama lags far behind other countries in regulating cryptocurrencies, and hopes that the Congress Trade and Economic Affairs Committee will give due attention to the bill.

South America

2. Colombia

Colombia is a land and sea country located in the north of South America, with an area of ​​about 1.1 million square kilometers and a population of about 5 million. In 1821, Colombia formed the Republic of Gran Colombia with Panama, Venezuela and Ecuador, which was later dissolved in 1830.

Economically, Colombia's pillar industries are mining and agriculture. It is rich in mineral resources, with oil, natural gas, coal, and emeralds as the main mineral deposits, among which emerald reserves rank first in the world. The main agricultural products are coffee, bananas, and flowers, among which coffee and banana exports rank third in the world, and flower exports rank second in the world. Colombia is a medium-developed country in Latin America, and its economy has maintained continuous growth over the past decade.

Recently, Jehudi Castro Sierra, digital transformation advisor to Colombian President Iván Duque Márquez, was in conversation with Jack Mallers, founder of Bitcoin Lightning Network wallet ZAP. Jack is the main developer of Bitcoin as legal tender in El Salvador, and ZAP's startup Strike has launched a Bitcoin Lightning payment application in El Salvador.

Jehudi Castro Sierra's interest in cryptocurrencies, as well as his direct contact with the Colombian president, seem to indicate that this issue will arouse interest in Colombia. As early as September 2018 to October 2019, when Jehudi Castro Sierra served as Deputy Minister of the Digital Economy of Colombia, he was also shown on social networks as a technology enthusiast, especially cryptocurrency.

3. Venezuela

Venezuela is a country located in the north of South America, known as the "Land of Waterfalls", with an area of ​​more than 900,000 square kilometers and a total population of more than 31 million. Venezuela is a member of the Union of South American Nations and the Organization of Petroleum Exporting Countries, and is also an important oil producer and exporter in the world. The oil industry accounts for about 80% of Venezuela's export revenue.

Previously, Venezuelan President Nicolas Maduro promised to revive the Petro Coin at the Constitutional Assembly, saying that the state-owned enterprise Petroleos de Venezuela would conduct "exploratory sales" of 50,000 barrels of oil per day through the Petro, and then consider expanding the scope of application of the Petro to oil transactions across the country. Taxes and utility bills will also be paid with the Petro.

Nicolas Maduro said that Venezuela is blazing a path towards a new economy. The crisis caused by outdated customs and self-contained bureaucratic mechanisms has stimulated Venezuela's innovative momentum. Venezuela will take an untraveled path and seek rebirth from adversity in the unknown.

However, although the Petro was launched by the Venezuelan government in 2017, the central bank routinely releases the exchange rate of the Petro against the RMB and other currencies, and the market also uses the Petro to mark prices, in order to circumvent the US economic sanctions and allow Venezuela to reconnect with the international capital market. However, since the launch of the Petro, the market response has been mediocre, and most people don’t even know where to buy the Petro.

Additionally, Dashcoin has become wildly popular in Venezuela, with the number of wallet downloads rising sharply each month since its adoption.

4. Ecuador

Ecuador is a country located in the northwest of South America, with an area of ​​about 260,000 square kilometers and a total population of over 15 million. After its founding, Ecuador's political situation has been turbulent, with coups d'état and 19 alternating civilian and military governments. Ecuador is known as the "Banana Country" and implements a dollarization policy in its economy.

Julio Eduardo Clavijo Acosta, Ecuador's deputy minister of economic inclusion, is a crypto enthusiast who changed his Twitter profile picture to laser eyes and repeatedly posted and reposted tweets related to Bitcoin and cryptocurrency. He also recently said that Bitcoin's ability to support charity and alleviate poverty is enough to prove its power to change.

In addition, in Ecuador's 2021 general election, presidential candidate Geovanni Andrade also expressed his intention to create a national cryptocurrency to facilitate transactions within Ecuador, and the new cryptocurrency will be a gold-linked stablecoin.

5. Brazil

Brazil is the largest country in South America, with a total land area of ​​about 8.5 million square kilometers, ranking fifth in the world, and a total population of 210 million, making it the world's seventh largest economy. Brazil has rich natural resources and a complete industrial base, with developed agriculture and animal husbandry, and is a major producer and exporter of a variety of agricultural products; Brazil has a strong industrial base and a full range of categories, including relatively developed petrochemical, mining, steel, and automobile industries.

In March of this year, QR Capital's Bitcoin ETF was approved by the Brazilian Securities and Exchange Commission and will be traded on the B3 Stock Exchange in Sao Paulo under the stock code QBTC11. Brazil has thus become the second country in the world to approve a Bitcoin ETF.

Moreover, according to Globo, Brazil's largest media, the number of Bitcoin investors in Brazil has exceeded the total number of individuals registered on the Sao Paulo Stock Exchange (B3), which is about twice as much. The actual number of traders may be more than this, and some traders may use foreign exchange or only trade offline.

On the other hand, data released by the Brazilian Institute of Statistics and Geography (IBGE) showed that in May this year, Brazil's inflation rate climbed to 8.06%, the highest level since September 2016, exceeding the market expectation of 7.93%. The rising inflation rate has become an important reason for the cryptocurrency boom in the Brazilian market.

6. Argentina

Argentina is located in the southeast of South America, with an area of ​​about 2.8 million square kilometers, second only to Brazil, and is the second largest country in Latin America. The country has a population of over 45 million, ranking 31st in the world. Argentina is one of the world's major producers and exporters of grain and meat. Thanks to its rich natural resources, open policies and diversified economy, Argentina once had a large middle class compared to other Latin American countries. In the early 20th century, Argentina's total economic output was among the top ten in the world.

However, due to the debt crisis in the 1980s, Argentina's economy declined sharply. Since 2008, affected by the international economic and financial situation, Argentina's economic growth has slowed significantly, inflation has been high, the local currency has depreciated, and foreign exchange reserves have declined. In recent years, Argentina's economic downward pressure has increased, and the economy declined by 11.8% in 2020.

In May this year, Bitcoin.com reported that more than 1 million Argentines have been buying cryptocurrencies over the past period of time. Local media Ámbito revealed that most of them bought Bitcoin and stablecoins such as USDT, USDC and DAI. The media also emphasized that users believe that such tokens are a more efficient way to convert Argentine pesos into US dollars.

In 2019, the value of the Argentine peso fell by about 40% due to inflation. Currently, the Argentine Congress is advancing a bill related to digital currency to provide a legal framework for digital currency and encourage its adoption. If adopted, banks and companies can also choose to use digital currency.

7. Paraguay

Paraguay is a landlocked country in central South America, with a land area of ​​about 400,000 square kilometers and a population of nearly 7 million. Its national economy is mainly based on agriculture and animal husbandry, and its industrial foundation is weak. It is one of the most backward countries in Latin America.

However, Paraguay is a renewable energy hub, with all domestic electricity coming from hydroelectric power. Paraguay's ITAIPU hydroelectric power station is the second largest hydroelectric power station in the world today, second only to China's Three Gorges, with an annual output of 103 megawatts, while Paraguay only consumes 20% of the country's electricity, and the rest is exported.

According to the Guardian, local miner Gregorio Bareiro said that Paraguay has abundant energy and can become a global Bitcoin mining center. Its best opportunity is not to sell energy to Brazil, but to invest in cryptocurrencies. In addition, the Korean Blockchain Technology Foundation has also negotiated with the Paraguayan government to establish the world's largest Bitcoin mining farm and cryptocurrency exchange.

On June 7, after Paraguayan Congressman Carlitos Rejala announced that he would introduce a bill to allow Bitcoin to be considered legal tender in El Salvador, Rejala posted a photo of himself with laser eyes on Twitter and said, “As I said a long time ago, our country needs to move forward hand in hand with the new generation. Our time has come. This week, we started an important project, and Paraguay is really taking off in front of the world of innovation!”

North America

8. Mexico

Mexico has an area of ​​about 2 million square kilometers, making it the third largest country in Latin America and the 14th largest country in the world. It has a population of 123 million, making it the 11th most populous country in the world. Mexico is a free market economy with modern industry and agriculture, and the proportion of private economy is also increasing significantly. After the formal establishment of the North American Free Trade Area in 1994, trade and investment between Mexico and the United States increased rapidly, promoting its economic development and increasing national income.

In February this year, The Economist published a report quoting Mauricio Hurtado, managing partner of PwC Mexico, saying that Mexican companies are now keen to join the Bitcoin craze. Mauricio Hurtado said that although Mexican companies used to worry that the lack of regulatory agencies made cryptocurrencies too risky as an investment asset, the situation has changed recently. Many companies feel that they simply cannot stay out of it, and companies are adjusting to market realities in order to defeat competitors and gain an advantage.

In June, Mexico's third-richest man, Ricardo Salinas Pliego, also changed his Twitter profile to a laser-eye one. Pliego also said that Bitcoin was his "best investment ever" and changed his Twitter profile to Bitcoin in February this year.

Additionally, Mexican federal government senator Eduardo Murat Hinojosa said he would present a “legal framework for cryptocurrency” to lawmakers. In a recent tweet, Hinojosa changed his profile photo to speak into a microphone with his signature laser eyes, expressing support for cryptocurrency.

In Latin America, Bitcoin is more popular than traditional finance

In Latin American countries with high inflation, the economy is often unstable, and holding local currency often means a significant depreciation of purchasing power. Other investment methods, such as foreign exchange and gold, have high barriers to entry and are difficult to obtain through traditional financial channels. Therefore, local people have turned to the application of other cryptocurrencies such as Bitcoin.

Many of the problems caused by inflation and subsequent capital controls can be solved with Bitcoin. Although workers and merchants initially used Bitcoin as a hedge against the depreciation of local currencies, Bitcoin is beginning to find a variety of practical applications in Latin America as a payment method. As a universal currency, Bitcoin allows consumers to shop and transfer money around the world. From Apple to Walmart, international companies may not accept local payment methods in Latin America, but Latin American online shoppers can use Bitcoin to shop, and Bitcoin can also help Latin America's tourism industry survive the current economic crisis.

Since Bitcoin can be used by anyone with an internet connection, it can also reduce foreign exchange costs for tourists and merchants. Since credit card penetration is low in Latin America, some well-known tourist destinations can use Bitcoin as a payment method to attract more consumers, and the payment process is faster and simpler, without the cost and delay of wire transfers.

In addition, regarding Bitcoin becoming the legal tender in El Salvador, Jiang Zhuoer, CEO of Litecoin Mining Pool, said that this is a historic moment for Bitcoin, and a new offshore financial center will rise. Coupled with favorable policies such as blockchain offshore enterprise registration and taxation, the rise of small countries will not be a dream. At the same time, Jiang Zhuoer is more optimistic about the prospects of Panama, and added, "Panama is closely following El Salvador and may become the next country to support the legal status of cryptocurrency. Panama is also the controller of the Panama Canal (a major route connecting the Atlantic and Pacific Oceans), and its influence is much greater than that of El Salvador."

El Salvador may be just a small country, but some countries have begun to try to emulate and follow its bold attempt. So far, politicians from seven Latin American countries have explicitly stated that they are also interested in Bitcoin.

However, "blessings often go hand in hand with disasters". The International Monetary Fund (IMF) also stated on June 10 that there are many economic and legal concerns about El Salvador's move to use Bitcoin as legal tender. The adoption of Bitcoin as legal tender may trigger a series of macroeconomic, financial and legal issues that require careful analysis.

But no matter what, Bitcoin has taken another important step. Any major change always starts from an inconspicuous crack, and the shock brought by cryptocurrencies such as Bitcoin may not be far away.