Over the weekend at the Bitcoin Conference the president of El Salvador, Nayib Bukele, announced he will propose legislation to make bitcoin legal tender throughout the country. Despite the praise from many in the crypto community, the move has not been without criticism; many quickly pointed out the authoritarian and corrupt nature of his presidency citing negotiated deals with the country's largest criminal gangs as well as a call to remove several judges from the Supreme Court of El Salvador with history of opposing him.

Right off the bat some of the potential positive outcomes could be a big increase in GDP for El Salvador coming from a sizeable reduction in remittance fees, a reduction of transaction times, and an increase in the 'banked' population (currently 70% of the country is unbanked). Currently remittances (generally money sent from abroad from a family member/other connection) account for a little over 20% of El Salvador's GDP. On top of this, the inflow of crypto entrepreneurs and and crypto capital could significantly boost the economy of a country with a GDP of ~27 Billion USD. Finally, given the nature of bitcoin's supply and the cult like following of bitcoin owners, this could highly incentivize leaders in the bitcoin community to make sure this works to prove the value of the network and drive the price per coin up.

On a global level, the designation of bitcoin as legal tender in a foreign nation could also alter the way bitcoin is accounted for in other nations. Under US GAAP, bitcoin has generally been labeled as an "indefinite-lived intangible asset" which implies that it cannot be treated like cash (or a foreign currency). Moreover this makes it so that current US companies holding bitcoin on their balance sheet must record an impairment if the price goes down, but cannot record any gains until they sell the coins if the price goes up.

If El Salvador and other nations begin to classify bitcoin as legal tender, this could make it so that companies across the globe can hold bitcoin on their balance sheet and account for it in the exact way they would account for any other currency. As innovation speeds forward, the taxing and accounting standards around cryptocurrencies will keep iterating and it will be interesting to see how it plays out.

Some negative outcomes could be that crypto entrepreneurs and businesses have trouble dealing with the distrust in the political system and are not able to effectively operate. Volatility in the price of bitcoin could be a massive deterrent for El Salvadorian citizens to utilize it for transactions or paying taxes and there is potential for a massive crash in the price of bitcoin if this legislation does not proceed. Moreover, I am not fully convinced that this is not simply a PR stunt for the president and other El Salvadorian parliamentary members. For Bitcoin to become a dominant currency in El Salvador, a country that adopted solely using USD in 2001, there will need to be many years of gradual changes in the legal code and adjustment - a process that I believe will have to endure many massive price swings and I am not confident it can. Currently I am very skeptical of this news but -

Does the CS community think this will go well? Seems to me that positive sentiment is quickly shifting over to Ethereum

this shows remittances as a percent of GDP in El Salvador