Coinciding with the rise of bitcoin in Latin America, the rest of the world is following suit.
To watch how El Salvador's economy and quality of life would change as a result of its adoption of a cryptocurrency as legal tender, all eyes are on the country.
In Latin America, why is this happening now?
Among the many reasons why Latin America is a good location for Bitcoin adoption is the fact that it has a large population of people who are underserved by the financial system.
Cryptocurrency can be used to facilitate remittances in Latin American countries, for example.
El Salvador's and Honduras' GDPs accounted for 20% and 11% of Mexico's GDP at the beginning of 2021, respectively.
Due to their importance to the economies of Latin American countries, however, the remittance of money is subject to exorbitant commissions (on average 10% of the remittance amount) and lengthy wait times (on average 2.4 days from the U.S. to other countries).
Those who have left their native nations in order to send money to their loved ones back home must pay cripplingly high transfer fees just to have their loved ones wait days or weeks for the monies to be received.
With Bitcoin and other cryptocurrencies, individuals can send money back to their relatives considerably more rapidly and at a lower cost than with traditional banking methods.
Due to high inflation and political considerations, several Latin American countries also have unstable currencies.
Venezuela and Argentina are two examples of countries that have had rates as high as 1,575 percent and 69.5 percent, respectively.
Bitcoin and Ether, on the other hand, have risen in value significantly despite their volatility.
In countries where inflation is a problem, this appreciation strengthens the rationale for using these currencies.
Because crypto is decentralised and does not rely on government-controlled organisations, banks, or other third parties, Latin Americans believe it is safer than their fiat currencies.
With cryptocurrencies, Latin American citizens do not need to place trust in their governments, in which they often place very little trust, or third-party entities that may act in their own self interest.
Instead, they can use the blockchain's trustless characteristics to their advantage.
As a final point, the amount of unbanked citizens in Latin America is a prominent argument for adopting cryptocurrencies as legal tender in the region.
More than 16.3 million Brazilians were unbanked as of May 2021
As a result, many Latin American individuals are unable to take out loans, generate wealth, earn interest and save money securely since they do not have bank accounts.
In Colombia, for example, the banked population expanded by 26% and in Mexico, by 13%
Cryptocurrency has the ability to overcome the financial inclusion gap that still exists in Latin American countries, despite these promising numbers.
There are other cryptocurrencies available in Latin America, why use Bitcoin?
Since Bitcoin is the oldest cryptocurrency and most frequently used as a store of value and means of trade, Latin American countries are particularly interested in using it. In this way, it is similar to gold.
In comparison to Bitcoin, other cryptocurrencies lack the history and security that Bitcoin has established. Ethereum, the second-largest cryptocurrency by market value, lacks the global appeal of Bitcoin.
Ethereum, while an excellent platform for Web3's decentralised applications, does not provide the same ease of use for payments and savings that Bitcoin does.
Traditional sovereign-issued currencies have a maximum supply of 21 million coins, which appeals to those who dread inflation.
Bitcoin is a better option for governments wishing to accept a cryptocurrency as legal cash than anything else currently on the market.
Because of its reputation as "sound money" with a fixed supply limit, it is an antidote to various fiat currencies whose value has been threatened by their issuers' monetary and fiscal policies.
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