As of April 2022, two countries have fully adopted Bitcoin as their currency, and more than five have created digital currencies.
Full Adoption Cases
The Central African Republic (CAR), one of the poorest countries in the world, adopted bitcoin as legal tender alongside the CFA franc in April 2022. It is the second in the world to take this step after El Salvador
The National Assembly unanimously approved establishing the bitcoin law governing cryptocurrencies in the Central African Republic. The country’s president, Faustin Archange Touadéra, has promulgated the rule, said in a statement by the chief of staff of the Presidency, Obed Namco.
CAR is the first country in Africa to adopt bitcoin as a reference currency. Namsio stressed this historic decision that puts the African nation on the map of most visionary countries in the world.
The adoption of bitcoin as legal tender represents a decisive step towards opening new opportunities for the country, following the steps of El Salvador which last September, became the first country to adopt bitcoin as a legal exchange currency alongside the U.S. dollar.
The bill was signed on April 27. The text of the existing law is not available yet, however, the press release also says that the Central African Republic “is the first country in Africa to adopt bitcoin as legal tender.” Later on, it says that it “represents the fact of accepting cryptocurrencies as a means of payment.” The new legislation defines the use of cryptocurrencies and those who use them for online trade.
In September 2021, El Salvador became the first country to adopt bitcoin as legal Tender. That allowed the cryptocurrency to be used in any transaction, from buying a cup of coffee to paying taxes.
President Nayib Bukele, a millennial well-versed in technological issues, has promoted the adoption of the digital currency and presents it as a way for more Salvadorans to integrate into the formal economy.It is estimated that around 70 percent of the country’s people do not have bank accounts. The president argues that cryptocurrency would make receiving remittances from abroad faster and cheaper and free the indebted nation from controlling the traditional global financial system.
Making Bitcoin a legal tender, along with the dollar, which has been used in the country since 2001, is part of Bukele’s strategy to attract cryptocurrency entrepreneurs, who seem to be his main audience.
El Salvador’s new policy puts it at the forefront of a revolution in blockchain finance, where a parallel universe of alternative banking services based on cryptocurrencies is booming.
Countries That Already Have Digital Currencies
CBDCs are digital currencies issued by central banks and serve as an alternative to cash. It is regulated by a specific state or a community of states.
This type of digital asset has 4 main characteristics:
- It is exchanged between peers
- It is universal
- It is anonymous
- It does not accrue interest.
The way it works depends greatly on the technology used for its creation.
What Differentiates CBDCsFrom Cryptocurrencies?
In principle, digital currencies are officially backed by the central banks that issue them. However, the value of cryptocurrencies is determined by the market, meaning that they are subject to the price of supply and demand. On the other hand, CBDCs are anchored to the value of a legal tender.
Another major difference is volatility. With digital currencies, central banks aim at financial stability. Meanwhile, cryptocurrencies, such as bitcoin, have high levels of volatility and uncertainty in the market.
Pros And Cons Of CBDCs
Among the benefits of this type of currency is creating more efficient payment systems. This, in turn, would imply greater financial inclusion for users. It would increase competition and reduce costs.
In addition, it replaces cash with a more efficient option. Considering that money is costly to produce and replace, requires certain infrastructure, and can be easily stolen.
Countries With Digital Currency
The DECP, or Chinese Digital Yuan, was recently released. In this case, users can have an application as a digital yuan purse or accumulate it in a physical card. They can use wristbands that function as a reader for transactions.
The currency has been around since 2014, according to D.W. As of 2022, it was opened for international use during the Winter Olympics. The possibility is already available for both Android and iOS devices.
In 2021 Nigeria became the first African nation to have a digital currency, the eNaira. In this case, it uses the same technology as Bitcoin. It derives its price from the official currency, and, for now, transactions are fully traceable by the government.
In October 2021, the Bahamas launched its ‘sand dollar.’ This is a digital dollar issued by the central bank. Residents can access this via an app or payment card.
Europe has also seen progress in this area. In July 2021, the European Central Bank launched a digital euro in the research and design phase.
St. Kitts and Nevis, Antigua and Barbuda, St. Lucia, and Grenada also have a digital currency in the Caribbean. These circulates within these countries and allows transactions to other countries where it is present. DCash, issued by the Eastern Caribbean Central Bank, is the first currency based on blockchain technology.
For its part, India will launch a state-backed “digital rupee” and impose a 30% levy on the profit from virtual currencies, the government announced Tuesday. The plan is a blow to one of the fastest-growing cryptocurrency markets, which has been unregulated despite the explosive emergence of local trading platforms.
Finally, in March 2022, U.S. President Joe Biden announced the start of work on creating a digital dollar as part of a major regulatory effort in cryptocurrencies, the White House has said.
According to a statement, the president will sign an executive order directing his administration to give “the highest priority to the development and research of a potential central bank digital currency (CBDC) for the United States,” according to a statement.
Either with cryptocurrencies or digital currencies, these countries have made advances yin fully adopting the new technology behind the crypto world and it is expected that, with ime, more and more countries will follow.