Bitcoin could boost business between El Salvador and the US, says Bank of America
In a recent report, Bank of America highlighted some of the main advantages that El Salvador can have from adopting Bitcoin as a legal tender. Among them, they highlighted the possibility of opening business channels with foreign companies, such as those in the United States.
In addition, the bank stated that El Salvador will also benefit in aspects such as: international remittances, financial digitization and greater options for consumers.
The report in question was shared by the president of the Central American country, Nayib Bukele on Twitter.
“The market has been overly pessimistic about this and is neglecting any argument in favor, even though these benefits are admittedly more uncertain,” analysts wrote
With regard to international business, BofA noted that the US is a hub for cryptocurrencies.
Thus, the adoption of BTC in El Salvador may make US companies migrate to the country seeking a favorable environment for digital assets. As a result, the Central American country could receive more foreign investment.
“There may be [foreign direct investment] from Strike (developer of the payment platform), Bitcoin miners, ATM manufacturers, among other types of firms,” said BofA.
According to Bank of America, as in other developing countries, remittance flows are equivalent to a substantial amount for El Salvador’s economy: 24% of GDP.
This is because there is a high incidence of remittances from Salvadorans abroad. The use of Bitcoin could, therefore, benefit the economy by reducing transaction costs in remittances to the country:
“Using Bitcoin for shipping can reduce transaction costs compared to traditional shipping channels. The idea is that Bitcoin can be used as an intermediary for international transfers”, said the bank.
Another positive implication is financial digitization. As the bank pointed out, currently, more than 70% of adults in El Salvador do not have a bank account.
“Therefore, democratizing access to electronic payments, through Bitcoin, has a progressive touch”, emphasized the bank.
However, as expected, there was not only praise for Bitcoin. After all, Bank of America pointed out that there are several risks involved in the legal adoption of BTC in El Salvador.
The bank said allowing people to pay taxes on highly volatile Bitcoins is particularly worrying. That’s because it can lead to sharp declines in revenue if the price of cryptocurrency falls.