Earlier this month, Swiss city Lugano accepted Bitcoin as legal tender in the region. The authorities also encouraged local businesses to accept crypto payments in everyday transactions. While Lugano’s crypto announcement surprised anti-bitcoiners, the crypto community’s reaction was pretty normal as they expected more countries and regions to accept Bitcoin due to rising inflation, uncertain geopolitical conditions and BTC’s status as a hedge against an unstable global economy.
Lugano is following the footsteps of El Salvador, the Central American nation that accepted Bitcoin as legal tender in the country last year. Despite criticism from global financial institutions like the World Bank and the IMF, Nayib Bukele, El Salvador’s president has continued with the country’s Bitcoin strategy. The adoption proved fruitful for the Central American nation as its GDP spiked by more than 10% in 2021, which is the highest level in the country’s history. Additionally, El Salvador’s tourism received a boost of more than 30% after its Bitcoin adoption.
But, why have countries and cities started adopting Bitcoin as legal tender? What are the loopholes in the current financial system? Are other countries taking a leaf out of El Salvador’s book?
“Bitcoin might be a potential 'way out' in an inflationary economy to preserve existing assets,” Marc P. Bernegger, the Co-Founder of the Crypto Fund AltAlpha Digital, said. In addition, Bernegger believes that the current macro-economic environment is unstable. Commenting on the loopholes in the global financial system, he said: “More and more investors question the sustainability of our actual monetary system, especially after the massive money printing due to COVID."
Alternative Asset
According to the basic definition, alternative assets are those assets that are not suitable enough to fit into the categories of stocks, bonds, and cash. While Bitcoin started its journey as a 'risky asset' which some people believe it still is, BTC has established itself as probably the most important alternative asset in the past few years. Bernegger said that the recent economic crisis and skyrocketing inflation have 'pushed’ investors to look into alternative assets like Bitcoin. The rising interest from institutions has contributed a lot towards the already increasing adoption of the world’s most valuable digital asset.
Bitcoin’s Long-Term Potential
BTC’s recent success is a combination of interest from short-term as well as long-term investors. While short-term investors are more into price movement and rallies, long-term investors believe in the growing adoption of cryptocurrency assets. “Long-term investors believe that Bitcoin can, and almost certainly will, change the course of our global financial system in the coming years. Places like Lugano and El Salvador have that long-term view and see putting in place infrastructure to support easy cryptocurrency movement as both a logical and essential move for the future,” Jason Deane, an Analyst at Quantum Economics, said.
According to Jason, long-term Bitcoin holders truly understand the decentralized nature of the crypto asset.
Institutional Bitcoin Adoption
The total number of global companies accepting Bitcoin as a payment method has increased significantly in the last few months. According to a research report published by Crypto.com, the overall number of cryptocurrency users reached 300 million by the end of 2021. The figure is expected to touch 1 billion by the end of 2022. With growing global adoption, companies have started realizing the potential of Bitcoin and that’s why firms like Overstock, Starbucks and Newegg are now accepting BTC for payments.
"We have seen the significant endorsement of non-traditional payment methods such as those made possible by bitcoin technology. eBay considering crypto as a new form of payment is an interesting development. Some might say it demonstrates bitcoin’s growing acceptance, signaling a new era in fintech. The increasing adoption of bitcoin undoubtedly validates its property as the base layer of an alternative financial system,” Paolo Ardoino, the CTO of Bitfinex, said.
Change in Tone
The tone around Bitcoin has changed substantially in the past few months. For instance, Jamie Dimon, the CEO of JPMorgan, once called Bitcoin a 'fraud'. Now, JPMorgan is exploring different possibilities within the global crypto space. Farah Mourad, the Senior Market Analyst at XTB MENA, said that the countries in Europe have changed their tone around Bitcoin and other crypto assets.
“Lugano’s Bitcoin announcement is a vital milestone for cryptocurrencies in the old continent where the European Central Bank president Christine Lagarde once labeled digital assets as 'suspicious'. A change in tone is also witnessed recently after the European Union has rejected a proposed rule that could have banned the cryptocurrency Bitcoin across the bloc,” Farah explained.
While El Salvador and Lugano have already accepted Bitcoin as legal tender, countries that are suffering from high inflation and a struggling economy are also considering the adoption of BTC. According to reports, countries like Mexico, Honduras and Argentina are currently exploring options for Bitcoin acceptance.
