Mainstream crypto: Is El Salvador's adoption progressive?
For many in the crypto and wider fintech industry, June 9, 2021, will go down in history as a pivotal moment.
When El Salvador announced that it would become the first country globally to officially accept Bitcoin (BTC) as legal tender, it was a landmark move for the crypto industry as a whole.
The news also came much sooner than anyone predicted. But what will this bold move mean for the future of crypto adoption?
With many governments still skeptical about cryptocurrency, it’s possible this decision could trigger other countries to fast-track discussions in order to keep up with evolving economies.
Cryptocurrency as legal tender: The impact
There’s no doubt that cryptocurrency provides a multitude of benefits, including quicker transactions and lower remittance fees. Particularly for El Salvador, where around 70% of the country is unbanked, it could be hugely beneficial for ordinary citizens.
However, some argue that it’s possible the real appeal won’t be to those already living in El Salvador, but crypto enthusiasts looking for a ‘crypto haven’.
Bukele has said he wants to help entrepreneurs embrace El Salvador as a crypto base, by pledging that BTC holders won’t be subject to capital gains tax. The potential to attract crypto-friendly entrepreneurs is likely to be a key driving factor for other countries considering this same move, especially as many economies struggle to recover following the pandemic.
This trend is already appearing in other Central and South American countries and could be the start of a domino effect as they start adopting BTC as national tender. Since the announcement, officials from Mexico, Paraguay, and Panama have all come forward with similar aspirations to integrate Bitcoin and other cryptocurrencies into their national economy.
Why should Bitcoin be the legal cryptocurrency?
In some ways, it’s very clear why El Salvador chose BTC.
It is by far the most popular cryptocurrency. There are an estimated 100 million people globally who own some amount of BTC, so it’s an obvious choice as the first crypto to beadopted as a national currency.
On the other hand, many skeptics found it surprising that a cryptocurrency known for its volatility would be adopted before a stablecoin.
Stablecoins are directly or indirectly centralised, meaning they’re either pegged to a traditional currency or backed by some kind of tangible asset. This makes them much less volatile, whilst offering all the same benefits of a decentralised cryptocurrency such as Bitcoin, Ethereum or Nano.
For these reasons, it could be argued that stablecoins seem the most logical contender for official adoption.
Of course, with cryptocurrency being relatively new within mainstream media, it isn’t surprising that stablecoins are relatively unknown. A recent study carried out by Wirex and The Stellar Development Foundation found that only 25% of crypto users had heard of stablecoins, suggesting they’re not quite ready to be fully embraced.
Bitcoin, on the other hand, has hit mainstream headlines as of late thanks to the likes of Elon Musk and international brands such as Paypal and Mastercard.
A milestone for Bitcoin
El Salvador’s decision is undoubtedly an exciting milestone for the crypto industry and dispels any rumours that cryptocurrency isn’t around for the long term.
All eyes will be on the nation in the coming months to see the reality of a country that has fully embraced cryptocurrency, and we will likely see many other countries following suit hoping to not be left behind.
Main image credit: San Salvador city, Getty Images
About the author: Pavel Matveev is the CEO of Wirex, the London-based fintech responsible for the multicurrency Wirex payment card that makes crypto and traditional currencies equal. He is also a blockchain entrepreneur with substantial financial/trading knowledge and more than 10 years of investment banking experience.
Nymbus enters strategic partnership with Plaid
Nymbus, a leading provider of banking technology solutions, has partnered with Plaid, a data network powering the digital financial ecosystem, to more instantly authenticate and fund customer bank accounts for financial institutions.
This new integration will allow Nymbus bank and credit union clients to securely onboard new users in a matter of seconds, which in turn translates to more active and engaged banking experiences. Plaid’s data network enables consumers to connect their financial accounts at over 11,000 institutions globally to more than 5,000 digital finance apps, including leading payments, investing, and budgeting tools.
What are the benefits of the integration?
Benefits of the Nymbus and Plaid integration for financial institution customers include:
- Improve user identity verification and reduce fraud.
- Instantly authenticate and link members’ bank accounts.
- Streamline ACH transfers between any bank or credit union in the US.
- Access and analyse comprehensive transaction data.
- Validate real-time account balances to protect against overdraft and enable account pre-funding.
“As more consumers than ever before rely on digital finances for their everyday lives, financial institutions need to meet their customers where they are while supporting safe and reliable money management experiences,” said Sarah Howell, Chief Alliance Officer at Nymbus. “Our expanding network of partners are important contributors to Nymbus’ combined portfolio of the technology, people and process available to quickly innovate with new routes to market and revenue streams.”
Continuous growth and expanding partnerships
Founded in 2015, Nymbus has continued to grow. Most recently the company has closed a new round of financing led by the Curql Fund. The US$5 million investment will be used towards Nymbus CUSO and accelerate a shared commitment to breakthrough technology for ensuring continued growth and stability for the credit union community.
Nymbus CUSO was founded in March 2021 to help break through barriers to growth, and its mission is to connect credit unions with trusted fintech offerings that both simplify technology delivery and enable new digital revenue opportunities.
Last year Plaid set a goal to move 75% of its traffic to APIs by the close of 2021, calling it “one of our top priorities as the industry moves full-steam ahead toward a fully digital financial system.”
Recently it has announced an open finance partnership with Capital One, a digital finance innovator, and the successful completion of its migration to the Capital One API. They have also completed or have in-motion data access agreements with major US financial institutions, including U.S. Bank, JPMorgan Chase, Wells Fargo, and others.