Ever since El Salvador made the daring decision to adopt Bitcoin as legal tender, the crypto scene has been abuzz with speculation about which country could be next. In January, Crypto.com published a report predicting crypto adoption rates to increase threefold this year, from 296 million to 1 billion. About cryptocurrency as legal tender, the exchange predicted the following:
[…] more nations facing a highly inflationary economy and depreciating currency may adopt cryptocurrency as legal tender, following the example of El Salvador.
El Salvador’s President Nayib Bukele made the same prediction at the start of the year:
So, when and which country will legalize cryptocurrency next? Will El Salvador stay the only country to make Bitcoin legal tender? First, let’s clarify the difference between legalizing crypto and making crypto legal tender.
Crypto Adoption, Regulation and legalization
If we ask CoinMarketCap users about which country they think will be the next to adopt crypto as legal tender, Paraguay, Venezuela and Anguilla (a tiny Caribbean nation) lead the race. But if we look at adoption rates of crypto, Chainalysis, a crypto research firm, paints a completely different picture:
That is because crypto adoption and crypto legalization are not the same things. Crypto may have a high adoption rate in a country like Vietnam, but it may be in a legal grey area (the government is actually trying to prohibit it). On the contrary, a country like El Salvador did not have a particularly high adoption rate but still made Bitcoin its official currency. Hence, it’s useful to understand:
- Crypto adoption is the usage of crypto in a country (metrics can vary wildly).
- Crypto legalization is that crypto is officially recognized as an asset or a currency and may be legally used (and is probably taxed).
- Crypto as legal tender: crypto is an official means of payment.
Only El Salvador is in the last category and remains steadfast despite criticism from the IMF. On the contrary, according to reports, some Salvadorians recognize Bitcoin’s benefits as a currency.https://www.youtube.com/embed/XDT5dtgmvw4?autoplay=0&mute=0&controls=1&origin=https%3A%2F%2Fcoinmarketcap.com&playsinline=1&showinfo=0&rel=0&iv_load_policy=3&modestbranding=1&enablejsapi=1&widgetid=1
So, does any of the countries in the CoinmarketCap list stand a chance of being the next El Salvador? Let’s look at the most likely candidates.
The South American Nations: Paraguay and Venezuela
Paraguay is rated the most likely candidate because of a bill that was rumored to make Bitcoin legal tender. Last year, congressman Carlos Rejala sent Crypto Twitter into a frenzy when he out on laser eyes and promised “something GIANT:”However, upon closer inspection, it was all just a publicity stunt, and Rejala never had the intention to attempt making Bitcoin Paraguay’s currency. He even acknowledged that himself, saying it would be “practically impossible” to do so. The Senate of Paraguay did, however, approve the bill, which legalizes crypto mining and defines key terms around virtual assets. In short, the bill introduces crypto-friendly legislation, but Paraguay is not looking to become the next El Salvador.In contrast to economically stable Paraguay, Venezuela is a country that fits the bill of the Crypto.com report much better: the country’s economy is battered by hyperinflation, and the local currency (Bolivar) is virtually worthless. Venezuelans have turned to play Axie Infinity for a living to make ends meet.Unsurprisingly, crypto adoption in the country has skyrocketed. Not only is crypto accepted at Venezuelan airports, but people are, out of necessity, starting to use it in their daily lives as a means of payment. Cointelegraph looked into how Venezuelans turn to stablecoins to protect their income from hyperinflation. The government has picked up on this trend and introduced the Digital Bolivar as competition to stablecoins and Bitcoin. In addition, it recently slapped cryptocurrencies with a 20% tax to steer its citizens towards its CBDC instead of private crypto.Thus, although Venezuela looks like a prime example of a country with little to lose and all to gain from crypto adoption, its authoritarian government is highly unlikely to make crypto legal tender. Even though crypto is increasingly present in South American nations – in part thanks to crypto payments becoming more widespread – legalization is the ceiling in this part of the world.
The Pacific: Tonga
Although Anguilla is ranked third by CMC users – probably due to its token-friendly regulation – another tiny island nation is much more likely to adopt crypto: Tonga.This Pacific island nation is home to Lord Fusitu’a, a Bitcoin bull that is working on copying El Salvador’s bill to make Bitcoin legal tender in Tonga.As a country that is highly dependent on remittances, crypto would have a use case as a currency. It is already accepting Bitcoin remittances following a Tsunami. Also, Tonga counts only 104,000 inhabitants, and the PR benefits of adopting Bitcoin could outweigh the possible economic risks. Moreover, just like El Salvador, Tonga has volcanoes, whose energy could, at least in theory, be used for Bitcoin mining.Without knowledge of the current political landscape in Tonga, it is hard to assess how realistic Lord Fusitu’a’s plans are, but Tonga may be the most realistic candidate for crypto adoption.
The Eastern Europeans: Ukraine and Russia
These two countries are mired in a geopolitical standoff, but they are also key players regarding crypto adoption and legalization.Ukraine has recently legalized Bitcoin, as it passed a crypto-friendly bill that is betting on making Ukraine a crypto hub in the future. Even though Ukraine lost a few places in the crypto adoption index, it is still among the leading nations, with its shaky economy in dire need of a winner to raise living standards. Hence, why joining the ranks of crypto-friendly nations makes sense for Ukraine.Russia, on the other hand, has been usually enigmatic about its stance on crypto. A seemingly endless “I love you – I love you not” approach saw the country criticize El Salvador and flirt with a ban several times. In the end, Russia did a 180 and will not only not ban crypto but treat Bitcoin as a currency. How much of that is due to geopolitics is anyone’s guess, but it forces the hand of countries like the US to come up with crypto-friendly legislation themselves.
Most countries – for now – stop short of making crypto legal tender. More often than not, such proposals are only PR stunts, as in the case of an Arizona senator. Still, some have picked their sides, and if countries like Ukraine and Paraguay reap the rewards of crypto-friendly legislation, that could spark a legitimate nation-state FOMO into crypto.