Blockchain technology powers the digital currencies, which is a decentralized ledger with a publicly accessible and verifiable transaction history. The cost of electronically moving funds and the cost of lending monies can both be considerably reduced with blockchain technology. Money transactions can be anonymous thanks to blockchain technology, which eliminates the need for a third party to oversee the transaction. In certain ways, the blockchain serves as a third party. The growing use of cryptocurrency in underdeveloped countries emphasizes the importance of context in the transaction cost story. While a technology advance may lower direct transaction costs such as transportation and storage, the legal structures that govern exchange differ greatly between areas, particularly in the poor world, and these can impose a variety of ambiguous transaction costs (Caton & Harwick, 2021) .
Bitcoin's goal was to develop a secure, safe, and censorship-proof cash system that could be used for global peer-to-peer transactions. In the second half of the last decade, the introduction of various new cryptocurrency platforms that are programmable, secure, and versatile has resulted in significant advancements. Because cryptocurrencies are programmable, they may be used not only to send and receive money, but also to create new, user-specific cryptocurrencies known as tokens. Cryptocurrency has several advantages like privacy, low transaction cost, high speed transfer, low barrier to entry, globalization etc. (Babu & Abraham, 2021) . Remittances can be sent quickly and securely using cryptocurrency. Migrants from Latin America and the Caribbean have been sending unprecedented amounts of money back to their home countries in recent years.
After El Salvador legalized bitcoin as legal tender in June, cryptocurrency in Latin America received renewed attention. El Salvador's president has signed a bill into law making Bitcoin legal cash in the country. Whether or not additional countries embrace Bitcoin as legal cash, as El Salvador did, has no influence on the quantity of Bitcoin produced, nor on how the consensus mechanism functions. Bukele tweeted that a "significant portion" of the $6 billion is lost to intermediaries who take a share of the greenback transactions. Panamanian Congressman Gabriel Silva has submitted legislation to offer legal, regulatory, and fiscal stability for the use, possession, and issuance of digital value and crypto assets in Panama. The law, labeled "Crypto Law: Making Panama Compatible with the Digital Economy, Blockchain, Crypto Assets, and the Internet," (Dossett, 2021). According to Silva's bill, blockchain technology makes government management more transparent and efficient. The bill also stipulates that cryptocurrency must be controlled in the same way that traditional currencies are, and that they will not replace existing currencies. Every country on the continent has its own crypto exchange rules, while other countries have yet to enact any laws governing digital currency trading or exchanges. What about the after math. According to international commercial law Bitcoin is also recognized as legal money in all of El Salvador's international treaties. Other signatories to these treaties, as well as banks and financial organizations, will be forced to adopt this currency. This movement will have a domino effect, affecting all companies with offices in El Salvador.
Cryptocurrencies also carry risks, which vary depending on the platform. It has environmental cost. Bitcoin mining has the potential to increase global warming beyond the 2 degrees Celsius goal set by international players as the worldwide commitment to mitigate the effects of global warming and climate change (Rosales, 2021) . Illegal trading can be done by cryptocurrencies. Many Latin American countries are concerned about the impact of cryptocurrencies on financial stability, as well as the risks of money laundering and penalties linked with them. Some speculators appreciate cryptocurrencies because of their rising value, but they are uninterested in their long-term adoption as a means of money transfer. Furthermore, cryptocurrency is tax-free. (Kareem, 2021). Bitcoin allows Latin American businesses to tap into a genuinely global market by allowing them to accept payments from clients all around the world without having to pay excessive cross-border transaction costs. And hassle of banking systems for transferring money. Many Latin American countries experience cyclical political and monetary volatility, eroding trust in local currencies. Argentina and Brazil, for example, have been early users of cryptocurrencies. Argentina's capital, Buenos Aires, is one of the top ten cities in the world for bitcoin usage. Colombia's government is looking into ways to use blockchain technology to boost security and avoid fraud. In 2017, the Central Bank of Colombia was one of the first to meet with a blockchain development business.
The oil-rich country has unexpectedly become a hotbed for cryptocurrency miners. Crypto mining is proving to be incredibly profitable in Venezuela, with electricity prices as low as 0.06 cents per kWh. Bitcoin can be earned in two ways. The first is to buy it with fiat money from an online exchange, and the second, more difficult method is to mine it. It's a highly specialized procedure. Miners work to verify each cryptocurrency transaction by solving complex mathematical equations, and they are rewarded with crypto currencies as a result of their efforts. Crypto is mostly utilized in Venezuela to protect against inflation, which causes bank accounts to depreciate dramatically in weeks or even days. Cryptocurrency rules span the legislative spectrum in Latin America. Bolivia, which has officially banned cryptocurrencies and exchanges, and Ecuador, which has issued cautions on the usage, investment, and circulation of all cryptocurrencies, are among the countries with stricter laws.
The adoption of bitcoin is unstoppable, owing to the long-term value proposition of bitcoin. This currency, which has its own rules, monetary policy, and consensus enforced by software, as well as an independent value that is untouched by the actions or decisions of any single player, is clear, unequivocal, and widely regarded as intriguing. (Dans, 2021). the hope that the country's pricing procedure will result in huge capital gains for its residents. Risk perception is influenced by a variety of circumstances, but early indications suggest that adopting bitcoin may be more of an opportunity than a risk for Latin American economy.
References
Babu, S., & Abraham, K. M. (2021). Central bank digital currencies: policy and operational perspectives for India. CSI Transactions on ICT, 9(2), 85–94. https://doi.org/10.1007/s40012-021-00327-6
Caton, J., & Harwick, C. (2021). Cryptocurrency, Decentralized Finance, and the Evolution of Exchange: A Transaction Costs Approach. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3891593
Dans, E. (2021). Bitcoin And Latin American Economies: Danger Or Opportunity?. Retrieved 10 September 2021, from https://www.forbes.com/sites/enriquedans/2021/06/14/bitcoin-and-latin-american-economies-danger-or-opportunity/?sh=1216ae315bfe
Dossett, J. (2021). Panama unveils bill to make Bitcoin legal tender. Retrieved 9 September 2021, from https://www.cnet.com/personal-finance/panama-unveils-bill-to-make-bitcoin-legal-tender/
Kareem, B. (2021). Cryptocurrency.
Rosales, A. (2021). Unveiling the power behind cryptocurrency mining in Venezuela: A fragile energy infrastructure and precarious labor. Energy Research & Social Science, 79(June), 102167. https://doi.org/10.1016/j.erss.2021.102167
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