Two countries made it last year alone Bitcoin (BTC -0.39%) a form of official currency. Back in June 2021, El Salvador became the first country in the world to introduce this cryptocurrency as legal tender alongside the US dollar. By April 2022, the Central African Republic followed El Salvador’s example and passed legislation that placed Bitcoin on par with its traditional Central African franc.
With two countries now accepting it as a form of payment, what are the chances of another making the move? And if so, which country is the most likely candidate?
If I had to guess, I believe Nigeria will be the next country to adopt Bitcoin as a form of official bidding. However, this is more than just a guess.
The next domino falls
Just last week, Babangida Ibrahim, the chairman of the House Capital Markets and Institutions Committee, claimed that the country is likely to pass legislation in the near future that would legalize the use of bitcoin. If Ibrahim is right, this would change the previous Investment and Securities Act of 2007, which recognized bitcoin as legal capital for investment.
If passed, the law would mark a 180-degree reversal from Nigeria’s previous stance on bitcoin. In February 2021, the country effectively banned financial institutions from trading cryptocurrencies. With the new law, companies could accept bitcoin as payment, securities firms could offer bitcoin-related products, and even industries like bitcoin mining could be established.
It looks increasingly likely that this law will be approved as Nigerian citizens are among the most active bitcoin users in the world. A recent survey found that a top 56% of Nigeria’s adult population globally had made at least one crypto transaction in the past month.
The bulk of these transactions could be related to Nigerian citizens sending remittances home. Nigeria’s remittance economy is one of the largest in the world, but the volume has been declining lately. As the percentage of skilled workers leaving the country continues to rise, a drop in remittances seems counterintuitive. Instead, this reflects how remittances are sent home.
Rather than Nigerians going through official money transfer companies that take a cut, many analysts believe they are using cryptocurrencies like bitcoin to evade fees and ensure 100% of their money goes into the hands of their family.
time to downsize
While passage of this law would allow for a more crypto-friendly environment for a population already familiar with the technology, the bigger picture is more important here. If this legislation is made official, it would mean a massive leap in legitimacy for Bitcoin.
Unlike El Salvador or the Central African Republic, Nigeria plays a more prominent role on the world economic stage. As Africa’s most populous country, Nigeria’s population of over 218 million is considered one of the most important and lucrative emerging markets in the world. Its acceptance of Bitcoin could serve as a model for other emerging markets to follow as citizens seek alternatives to the current remittance market and viable alternatives to weak national currencies.
As more and more people turn to bitcoin, a simple supply and demand dynamic would likely develop. Due to its limited lifetime supply of just 21 million coins (and 19.2 million exist today), Bitcoin’s price should increase as demand increases. Based on current developments, Nigeria could be just one of many countries in the coming decades that will eventually adopt the Bitcoin standard and further fuel demand for the world’s first cryptocurrency.
RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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