A critical component to the success of cryptocurrency is ensuring there is as low a barrier to entry as possible, and crypto wallet apps are designed to make investing, buying and selling using the blockchain as seamless and free of restraints as using cash.
Much like how foreign currency exchange went from requiring an awkward wait in the queue of a bureau de change to a simple process requiring a few taps in a payment processor app, a wallet app is similarly designed to make it easy to get your money into crypto and get it out just as easily.
However, one fascinating intersection of this is that several countries have proposed and one actively uses cryptocurrency tokens as one of their national currencies.
With that in mind, here are all of the countries that either have used or have seriously proposed adopting a crypto token as legal tender.
Why Does Legal Tender Matter?
The concept of legal tender is commonly misunderstood, and because of this, its importance is simultaneously under and overestimated.
The strict definition of legal tender is a currency that if offered in a court of law for the payment of a monetary debt must be legally recognised and accepted. Legally, anyone entering into a contractual relationship (such as offering to buy something) can accept any object of value that has legal recognition.
However, whilst this rigid definition is hardly applicable to everyday life, being classified as legal tender is important for dictating the long-term viability of any form of currency.
Whilst legal tender does not always have to be accepted, with card-only machines, cash-only shops and crypto-only vendors being legal and popular around the world, being legal tender gives a currency a degree of acceptability, stability and respectability in a nation,
Currency accepted as legal tender means that the jurisdiction that did so has an incentive to make it as acceptable and easy as possible to use this form of currency.
The Three Attempts
Whilst there is one currency in the world that accepts cryptocurrency as legal tender, and El Salvador will be examined, there were three other serious attempts by nations to make cryptocurrency legal tender.
One of these was the South Pacific island nation of Fiji, where politician and Bitcoin advocate Sitiveni Rabuka wanted to push through legislation to make Bitcoin legal tender just a year after his election in 2023, even converting the national territory into the cryptocurrency token.
However, as of 2024, these have not happened, and a statement by the Reserve Bank of Fiji in April warning against its use despite a bull run for Bitcoin suggests it may no longer be a priority.
A much more tragic story happened in the Polynesian country of Tonga. Mataʻiʻulua ʻi Fonuamotu, Lord Fusuitu’a was a noble of the Realm and was an extremely vocal advocate for Bitcoin to become legal tender in Tonga, even claiming to have tabled a “carbon copy” of El Salvador’s bill to make it a reality.
Unfortunately, he suffered from several health issues before he could use his political weight to advocate for the currency before dying in 2024 after a long battle with cancer.
Finally, the Central African Republic adopted Bitcoin as legal tender in 2022, although within a year it had already been repealed.
Part of the reason was that the Banking Commission of Central Africa had already banned crypto in 2022, and this alongside the fact that just ten per cent of the nation had internet access meant that the proposal, whilst well-intentioned, was a nonstarter.
The One And Only
The smallest and most densely populated country in Central America, El Salvador is the first and currently only country to accept Bitcoin as legal tender.
This took place thanks to the Bitcoin Law in 2021, which when passed made it legal for taxes to be paid in the cryptocurrency, and taxes could also be paid for in Bitcoin.
El Salvador was a unique test case for the utility and viability of crypto as legal tender, as the country has not had its own currency since the replacement of the El Salvador colón (SVC) with the US Dollar (USD) at the start of 2001.
At one point, there were more Bitcoin Chivo wallets than bank accounts in the country, something that was used as a justification for adopting crypto in the first place; it would help underbanked and unbanked people access digital currency.
There was an initial rush to use wallets by people with the internet access and mobile phones to access the official Chivo app, largely because people who signed up would get $30 worth of Bitcoin to incentivise rapid adoption.
It is too early as of 2024 to say whether this was a success or failure, but a recent statement by the International Monetary Fund (which told El Salvador to not adopt Bitcoin as legal tender in 2021) noted that a lot of the risks that had been cited had not materialised.
Whilst it had not been used domestically, it had led to greater interest from overseas investors, particularly from companies and individuals who take a somewhat evangelical approach to crypto.