Bitcoin unlikely to get legal tender status in major economy soon

Bitcoin unlikely to get legal tender status in major economy soon

by Ras Vasilisin
23. May 2022
Bitcoin unlikely to get legal tender status in major economy soon

The Central African Republic (CAR) has an annual gross domesetic product of $2.3bn, similar to the market capitalization of ApeCoin (APE).

So the CAR’s decision to make bitcoin (BTC) legal tender may have generated lots of headlines but it is unlikely to impact the price or volatility of the bellwether crypto.

Mexico, however, is a different story. It has a trillion dollar plus-sized economy, the world’s fifteenth largest, and it is looking at bitcoin.

Mexican senator Indira Kempis’s proposed legislation to make bitcoin legal tender in her home country may face problems hitting the statute book but what would happen if a major economy started taking bitcoin?

What would happen if a major economy made BTC legal tender?

Ryan Shea, crypto economist at digital asset investment firm Trakx says that a major economy making BTC legal tender would give it a significant price boost and also raise short-term volatility.

“In the longer term the likely impact on volatility is less clear as it would be determined by the price elasticity of demand,” he adds.

“One could make the case that with a broader ownership demographic there would be more diverse reasons for BTC demand that could help to lower price volatility, but that is far from assured.”

It may take some time to put this to the test, according to analysts spoke with. The consensus view is that a G10 country is unlikely to recognise BTC as legal tender in the near future.

This approach is more attractive to smaller and developing economies that have been disadvantaged in international trade due to their weak currencies, says Angel Zhong, associate professor of finance at RMIT School of Economics and trading trends expert.

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