In the past year alone, two countries have made Bitcoin (BTC -0.34%) a form of official currency. In June 2021, El Salvador became the first country in the world to adopt this cryptocurrency as a form of legal tender, alongside the US 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.
Now that two countries recognize it as a form of currency, what is the chance that another will make the move? And if so, which country is the most likely candidate?
If I had to guess, I think Nigeria will be the next country to adopt Bitcoin as a form of official offering. However, this is more than just a hunch.
The next domino to fall
Last week, Babangida Ibrahim, the chairman of the House Committee on Capital Markets and Institutions, claimed that the country will probably pass a law in the near future that would legalize the use of Bitcoin. If Ibrahim is correct, this would amend the previous Securities and Investments Act of 2007 which recognizes Bitcoin as legal capital for investment.
If the bill passes, it would represent a 180-degree shift from Nigeria’s previous stance on Bitcoin. In February 2021, the country effectively banned financial institutions from trading cryptocurrencies. With the new law, businesses could accept Bitcoin as payment, investment firms could offer Bitcoin-related products, and even industries like Bitcoin mining could be established.
It seems increasingly likely that this law will pass, as Nigerian citizens are some of the most active Bitcoin users 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 could be related to Nigerian citizens sending remittances 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 decline in remittances seems counterintuitive. Instead, this reflects What remittances are sent home.
Instead of Nigerians going through official money transfer companies taking a cut, many analysts believe they are using cryptocurrencies like Bitcoin to circumvent fees and ensure 100% of their money goes to their family.
time to move away
While the passage of this law would allow for a more crypto-friendly environment for an already tech-savvy population, the big picture here is more important. If this legislation becomes official, it would represent a huge leap in the legitimacy of Bitcoin.
Unlike El Salvador or the Central African Republic, Nigeria is a bigger player on the world economic stage. As the most populous country in Africa, Nigeria’s more than 218 million citizens are considered one of the most important and lucrative emerging markets in the world. Its adoption of Bitcoin could serve as a role model for other emerging countries as citizens seek 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 is likely to play out. 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 coming decades, Nigeria could be just one of many countries to finally adopt the Bitcoin standard and fuel demand for the world’s first cryptocurrency.
RJ Fulton has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.