I've been thinking a lot about what might happen if the United States decided to actually make Bitcoin legal tender. It's quite a wild idea, especially considering the approaching presidential election and crypto-friendly candidates like Trump and Kennedy ahead, putting a light on Bitcoin. That got me thinking, what if one of them went all in and made BTC an official currency?
First, I think that would send shockwaves throughout the financial world.
Clearly, Bitcoin's legitimacy would go through overnight. Then, we would probably witness a huge inflow from both the common people and the big institutions pouring money into BTC. The price would go insane, at least for a little bit. A little, because I'm not exactly convinced that everything will be plain sailing.
It could get really choppy.
There would be loads of speculation with people just buying left and right out of fear of missing out. At the same time, however, we might witness the big sell-offs from long-term holders cashing in their profits. Exactly how all that would happen is hard to predict, but it's going to be a wild ride.
One thing I am pretty sure about is that it would force clearer regulations around crypto.
Of course, that could be a double-edged sword. On one hand, things may turn out brighter for businesses and investors. On the other hand, some of that decentralized, anti-establishment appeal gets lost.
I am reminded of the incidence of El Salvador's use of Bitcoin as a legal tender. It has been so helpful to them, especially in terms of tourism. But the USA is a different matter. This is the largest economy in the world. The global impact would be enormous.
The technical challenges would be huge too. I mean, El Salvador and the Central African Republic struggled with infrastructural problems upon the adoption of Bitcoin. Of course, differently for the USA, scaling a crypto payment system for hundreds of millions, but that's not small either.
I wonder how this also would affect America's position vis-à-vis the global financial system.
After all, a dollar is the world reserve currency, which is big business. Would embracing Bitcoin strengthen or weaken that position? Hard to say, but I bet a lot of other countries would be watching closely, maybe even following suit.
Personally, I find the prospect both exciting and concerning. Bitcoin as a legal tender in the USA could be revolutionary but equally disruptive. I never feel that society would stand ready to digest an idea of this magnitude. But then again, isn't that exactly what we need, to shake things up and really get moving toward a modernized system of finance?