Bank Of America Analyst Believes El Salvador's Decision To Adopt Bitcoin Is Right

Bitcoin is believed to make sending money to El Salvador very cheap. (photocardmapr/unsplash)

JAKARTA - Bank of America, one of the largest financial institutions in the world by total assets, believes that El Salvador can benefit greatly with its latest decision to Bitcoin (BTC).

In a report published last week, analysts at the bank said El Salvador's decision to recognize BTC as a legal tender could streamline remittances, promote the digitization of finance, give consumers greater choice and open up the country to American companies and digital currency miners.

The banknotes that remittances account for 24% of El Salvador's gross domestic product, but most of it goes to transaction fees.

“Using Bitcoin for remittances has the potential to reduce transaction costs compared to traditional remittance channels,” said the report, published by Diario El Salvador.

“The idea is that Bitcoin can be used as an intermediary for cross-border transfers, so that dollars are converted to Bitcoin by the sender and then converted back to dollars domestically by the recipient,” the report adds.

In June this year, El Salvador became the first nation-state to accept Bitcoin as legal tender. This, marks a significant milestone in the evolution of digital currencies from obscurity to mainstream acceptance.

The decision to integrate BTC into the country's financial system has been criticized by the International Monetary Fund and the United Nations Economic Commission for Latin America and the Caribbean. Meanwhile, JPMorgan Chase believes El Salvador's Bitcoin move could put additional pressure on the network's already limited ability to function as a medium of exchange.

Survey data shows half of Salvadorans are skeptical about using BTC as legal tender. Those who choose to adopt BTC for transactions can use the state-backed Chivo Bitcoin wallet, among many other options available to them.

Since El Salvador recognized Bitcoin as a legal tender, several other Latin American countries have hinted at pursuing their own cryptocurrency strategies. However, to date, no other country has followed in El Salvador's footsteps.