In just the past year, two countries have made Bitcoin (BTC -0.33%) a form of official currency. Back in June 2021, El Salvador became the first country in the world to adopt this cryptocurrency as a form of legal tender, alongside the U.S. dollar. By April 2022, the Central African Republic followed El Salvador’s lead and passed legislation that put Bitcoin on the same level as its traditional Central African franc.
With two countries now recognizing it as a form of currency, what is the possibility of another one making the move? And if so, which country is the most likely candidate?
If I had to guess, I believe Nigeria will be the next country to adopt Bitcoin as a form of official tender. This is more than just a hunch, though.
The next domino to fall
Just last week, Babangida Ibrahim, the chairman of the House of Representatives Committee on Capital Market and Institutions, claimed the country will likely pass a law in the near future that would make the use of Bitcoin legal. If Ibrahim is correct, this would amend the previous 2007 Investment and Securities Act recognizing Bitcoin as legal capital for investment.
Should the bill pass, it would represent a 180-degree turnaround from Nigeria’s previous stance on Bitcoin. In February 2021, the country effectively banned financial institutions from dealing with cryptocurrencies. With the new law, companies would be able to accept Bitcoin as payment, investment firms could offer Bitcoin-related products, and even industries like Bitcoin mining would be able to be established.
This law looks increasingly likely to get approved as Nigerian citizens are some of the most active users of Bitcoin in the world. A recent survey found that a world-leading 56% of Nigeria’s adult population had made at least one crypto transaction in the past month.
The bulk of those transactions might be related to Nigerian citizens sending remittances back home. Nigeria’s remittance economy is one of the largest in the world, but there has been a recent decline in volume. While the percentage of skilled labor leaving the country continues to rise, a decrease in remittances would seem counterintuitive. Instead, this reflects how remittances are being sent back home.
Rather than Nigerians going through official money-wiring companies that take a cut, many analysts believe that they are utilizing cryptocurrencies like Bitcoin to circumnavigate fees and make sure 100% of their money goes into their family’s hands.
Time to zoom out
While passing this law would enable a more crypto-friendly environment for a population already savvy with the technology, the bigger picture here is more important. If this legislation is made official, it would represent a massive leap in legitimization for Bitcoin.
Unlike El Salvador or the Central African Republic, Nigeria is a more consequential player on the world’s economic stage. As Africa’s most populous country, Nigeria’s 218 million-plus citizens are considered one of the world’s most important and lucrative emerging markets. Its embrace of Bitcoin could serve as a model for other emerging countries to follow as citizens look for alternatives to the current remittance market and viable alternatives to weak national currencies.
As more people turn to Bitcoin, a simple supply and demand dynamic would likely unfold. Due to its limited lifetime supply of just 21 million coins (and 19.2 million in existence today), Bitcoin’s price should increase as its demand increases. Based on the current trajectory, in the next few decades, Nigeria could be just one of many countries to eventually embrace the Bitcoin standard and further fuel demand for the world’s first cryptocurrency.