Salvador is the first nation to recognize bitcoin as legal currency. According to Vedomosti, quoting international media, Salvador’s president said previously that it would help the country’s people save about $400 million in commission fees each year.
There are about 2.5 million Salvadorans that live and work in the United States. According to Natalia Rakova, Head of Financial Services Advisory at KPMG in the CIS, the government decided to make bitcoin legal currency in order to increase monetary inflows from migrants, many of whom do not have bank accounts since they operate in the informal sector.
Yuri Gelgafov, Director of the EY Technology Center, said that Bitcoin is a savings tool. Because its rate is volatile, it is difficult to use as a day-to-day payment method. Because the majority of current bitcoins are held by a few hundred partly anonymous addresses, many feel that the bitcoin rate is not only volatile but also easily manipulated.
Concerns about manipulation, the potential use of bitcoin for money laundering, and tighter restrictions all contribute to the cryptocurrency’s volatility, according to Gelgafov.
Other nations, though, may seek to recognize cryptocurrencies in order to make it simpler for migrants to transfer money home, according to Rakova. She thinks that countries in Latin America and Africa are most likely to take such a move.
In the former Soviet Union, even those people who work in the informal sector utilize conventional money transfer methods in some form or another, or have found another solution to the issue.