A number of countries will legalize cryptocurrencies: how it will affect the rates and future of digital assets

Cryptocurrencies are still persona non grata in most countries, and yet somecountries are interested in them and attach importance to digitalassets official status. For example, El Salvador is the first country in the world to legalize Bitcoin as a means of payment. How will this affect the future fate of cryptocurrencies and their market rate?

Pioneer country

Since its inception, cryptocurrencieswere persecuted and found themselves in an almost legal vacuum, as their legal status was not clearly defined, and they were often perceived only as a tool for fraudsters.

However, over time it became clear thatdigital currencies have become entrenched in the global financial market. This year, the small Latin American country of El Salvador has made a real revolution. She was the first country in the world to legalize bitcoin as a means of payment. This made a splash in the market and the bitcoin rate immediately jumped by 16%.

Illustration: a jump in the bitcoin rate after its recognition as a means of payment in El Salvador

In addition, the Government of El Salvador will createofficial crypto wallet for storing bitcoins in the amount of $ 150 million. This is necessary in order to be able to quickly convert bitcoin into US dollars. Now prices for goods and services in El Salvador can be set not only in fiat money, but also in cryptocurrency, and taxes can be paid in it.

Later, the country's authorities promised to distribute to the population$ 30 in bitcoins in order to make it more popular among Salvadorans. Market participants were ambivalent about El Salvador's decision on bitcoin. Analysts of the American investment bank JPMorgan fear that the legalization of bitcoin will negatively affect the state of the country's economy, since this cryptocurrency is not liquid enough and is very volatile. Nevertheless, many experts argue that such a decision by the El Salvadorian authorities will set an example for other countries and have a positive impact on cryptocurrency rates.

The example is contagious

Following El Salvador, other Latin American countries have become interested in legalizing Bitcoin. Paraguay has already proposed recognizing this cryptocurrency as a legal means of payment. 

Bill submitted for discussionparliament, proposes to regulate mining and trading of digital currencies, and also concerns taxation and the creation of a reserve crypto fund following the example of the Salvadoran one. The bill obliges cryptocurrency firms to register with the relevant authorities in Paraguay. 

The bill submitted to parliament did not havesignificant impact on the bitcoin rate - the cryptocurrency continued to fluctuate in a sideways trend. However, if Bitcoin is legalized in Paraguay, it will push the rate up.

Illustration: Bitcoin dynamics after the introduction of the bill in the Parliament of Paraguay

Conservative European Approach

So far about giving the status of a means of paymentCryptocurrencies are spoken only in Latin America. However, in some countries in Europe and Asia these assets feel free. For example, in Estonia, financial companies providing cryptocurrency exchange and storage services are subject to the same requirements as any other financial institution that deals with traditional money. No special legislation regulating the operation of the crypto market has been introduced in Estonia. 

At the same time, Estonia has strict requirements:the market must be legal and transparent - special licenses are issued for this. This approach attracts crypto companies to this jurisdiction and indicates that even fairly conservative European countries regard the cryptocurrency market as a full-fledged segment of the financial sector.

What does this mean for cryptocurrencies?

The fact that more and more countries are supportivelooking at digital currencies is a positive signal for the crypto market. Other countries can soon be expected to follow the lead of El Salvador. Perhaps it will not be the countries of Europe and the United States, but less significant states, and, nevertheless, this is a favorable trend. Obtaining official status for cryptocurrencies helps to increase investor confidence, which leads to an increase in their market price.

Author:Dmitry Noskov – expert at StormGain, a platform for trading, purchasing and storing cryptocurrency

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