Bitcoin Domino Effect Taking Place, Tonga Makes a Bitcoin Move

A former member of Parliament of Tonga predicts that Bitcoin will be the state’s legal tender by November emulating El Salvador’s move.

By
Chung Yee
on
January 15, 2022
Category:
Blockchain News

Bitcoin Adoption Domino Effect

Tonga, a Polynesian country, has set its sight on adopting Bitcoin as its legal tender as a former member of parliament recently outlined an adoption path.

Lord Fusitu’a, the Tongan noble who will be tabling the Bitcoin bill, tweeted on January 11 with an estimated timeline showing that the rollout could occur in just a few months. Fusitu’a is bullish on the economic opportunities that Bitcoin will bring. 

He also tweeted a rationale behind the move:

‘Tonga survives on remittances from diaspora. Tonga’s GDP in 2021 USD$510m. 40.1% (highest on earth) or $200m was made up of remittances. But only $130m got to Tonga @WesternUnion & banks took $70m in fees. Bitcoin on lightning is free & reclaims that $70m’

The long-term impact of adopting a cryptocurrency as a legal tender is yet to be seen. But, small nations are starting to look at Bitcoin as a possible solution to end poverty. Bitcoin has a finite number, and with the growing demand, its value will increase. This helps eradicate inflation, a major concern for many countries with a limited money supply. 

Source

Costly Remittances

One of the driving factors that led Tonga to the Bitcoin move is remittance costs. Tonga’s economic and social development is funded through remittances from its emigrant diaspora. The island nation receives remittances from countries such as New Zealand, US, and Australia. These countries account for up to 90% of the total remittances received by the Kingdom of Tonga. 

If Bitcoin is adopted, whatever is paid in fees for the remittances now flows into the pocket of its people, increasing their disposable income. El Salvador was the first country to adopt Bitcoin as its legal tender on September 7, and remittances were a primary motivating factor. 

Zhu Su believes that the inefficiencies of the legacy system and high fees will direct more nation-states to look at crypto for a solution.

Bitcoin Fixes It 

Countries that turned to the International Monetary Fund (IMF) and World Bank often find themselves subjected to crippling conditions forced upon them. These organizations will impose austerity measures to cut public spending as conditions for loans. 

Suppressing public spending inhibits the development of secondary and tertiary industries. A country will not progress from its current status, entering a perpetual debt cycle. 

Bitcoin provides that financial freedom that allows small nation-states to break away from the financial hegemony imposed by the IMF and World Bank. It also gives financial access to the unbanked and underbanked. 


Others Will Follow

Some economists have warned El Salvador that its Bitcoin move will be a costly mistake. The country is not in a worse position than it was. Instead, it became a precedent for other nation-states to emulate. 

Tonga’s decision to walk the same path is likely to draw even more attention. States subservient to the demands of the IMF and World Bank will soon realize that they do in fact, have a viable choice. 

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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