By now, you have undoubtedly heard of some form of cryptocurrency. From Bitcoin’s unprecedented race to Ethereum, and even coins like Dogecoin, the rise in popularity of cryptocurrency has taken the world by storm.
If you’ve been following the historic boom in crypto, you may have heard about some of the potential benefits and risks that adopting the currency can present in Central America. Last June, President Nayib Bukele of El Salvador made history by announcing via Twitter that El Salvador had become the first country in the world to approve a law classifying Bitcoin as legal tender in the country. This decision was approved almost unanimously, with Bukele citing the ease of remittances for many El Salvadorians living abroad in the United States and elsewhere as a major factor in the approval decision.
With the rise of cryptocurrency, what could all of this mean for Costa Rica and the rest of Central America? What is cryptocurrency and how does it work? What are some of the benefits and risks of adopting cryptocurrency as a legal form of offering in the future?
In a few short segments, we’ll dive into the interesting world of crypto to help get these questions answered and more.
What is cryptocurrency?
Cryptocurrency, or “crypto” as it is commonly called, is a digital form of currency that is protected by cryptography and allows the owner to purchase goods and services in exchange. There are currently over 10,000 cryptocurrencies traded through the stock market, the most popular of which is the now known name of “Bitcoin”. Bitcoin made its meteoric rise from just over $ 100 in 2013 to over $ 60,000 at its peak.
Cryptocurrency uses a technology called blockchain to record and track transaction information between parties in a way that provides security and protection against hackers. Once an individual has obtained a cryptocurrency by purchasing it through another form of legitimate currency, exchanging it, or “mining” it.
Their transaction is recorded and they are free to exchange or spend (when accepted) the currency as you would with any other form of bidding. In a much less complicated sense, you can think of cryptocurrencies as online tokens. The value of these tokens can vary from a few fractions of a penny to tens of thousands of dollars depending on the crypto you have acquired.
What are some of the benefits and risks of cryptocurrency?
Now that you have a good general idea of the nature of cryptocurrency, let’s take a look at the practical application of these currencies as legal tender and what it can entail.
Governments and individuals see many benefits in allowing the acceptance of digital currency as a legal form of tendering. Some of these benefits are speculative, as cryptocurrency is relatively new and may take some time to circulate to have significant effects in these areas. Here are some of the most popular benefits cited:
- Crypto-currencies transactions are carried out on a peer-to-peer basis. Removing the money management aspect of finance to banks allows the crypto owner to be almost completely self-sufficient when it comes to their funds. As a result, several other attractive benefits are starting to emerge. This includes avoiding pesky overdrafts, minimum account balance, and returned deposit fees.
- Crypto-currencies are decentralized. This aspect of crypto is extremely attractive due to the fact that the respective money will no longer be tied to a central bank or government agency. By withdrawing money from central banks or financial institutions, the crypto owner can theoretically avoid the tumultuous rise and crash of traditional currencies due to inflation.
- Cryptocurrency transactions are secure. With each transaction, transaction information is tracked and recorded through a network of thousands of computers, where the transaction is then added to the blockchain. Unlike traditional physical money, this allows the currency to have some sort of digital history. This feature of digital currency ensures the security of transactions in a way that does not require any third party and ensures that payment will be made due to the fact that transactions are irreversible.
- Cryptocurrencies are multinational. Since digital currency is not tied to any particular government institution or to a single country, cryptocurrencies are essentially borderless. This is a major advantage for owners of the currency trying to transact with individuals in another country. The digital nature of cryptocurrency eliminates the need to exchange different forms of physical currency and also helps avoid the high cost of country-to-country bank transfer fees.
While these additional advantages have major advantages, no currency trading system is without flaws. Here are some of the main concerns associated with the substitution of crypto for physical money.
- Cryptocurrency transactions are semi-anonymous in nature. Due to the anonymity associated with crypto, there are concerns that crypto is ripe for carrying out illegal online activities such as tax evasion and money laundering. Some cryptos are more anonymous than others, and some cryptos like Bitcoin have actually helped track criminal activity online. Still, the anonymous nature of some cryptos may invite the idea that they are safe to conduct such activities.
- Cryptocurrencies, like any other online product, are subject to below average cybersecurity risks. While blockchain technology is considered to be one of the most secure forms of cybersecurity measures to emerge in recent history, that doesn’t mean the crypto exchange is safe from all online threats. With so many new cryptos appearing, the security will only be as good as that of the crypto-custodians providing it. The usual risks like hacking and data extortion are still present.
Cryptocurrency and Costa Rica: What Does the Future Look Like?
With interest in cryptocurrency growing in Central America and neighboring countries, what may the future of crypto hold for Costa Rica and its residents?
Cryptocurrencies, although not officially recognized by the Central Bank, are already recognized as a legitimate form of payment across the country. In addition, according to the country’s labor code, workers have the right to be paid part of their wages through cryptocurrency.
What else makes Costa Rica a promising new cryptocurrency paradise?
While the world-class views and beaches certainly don’t detract from their case, Costa Rica is ripe for cryptocurrency pioneers in many ways.
Costa Rica is one of the most crypto-friendly countries in the world, with a long list of companies already accepting various cryptocurrencies as a viable payment method. They even have 3 ATMs located around the country that accept crypto as a form of payment.
EOS Costa Rica, which has earned the nickname “The Ethereum Killer,” is an already booming blockchain producer located in the country; an encouraging sign for new crypto start-ups looking for a place to reside. This ranks 33rd in the world in the crypto category at the time of this article. Combine that with the fact that they are among the world leaders in the renewable energy needed for Bitcoin mining, and excellent infrastructure, and you yourself have a prime candidate for crypto-techs looking. of a place to settle.
Costa Rica’s well-known economic and political stability, especially compared to other Latin American countries (see Venezuela), is also a positive argument for crypto and blockchain startups.
With cryptocurrency resources, infrastructure, and regulation among the most favorable in the world for cryptocurrency and blockchain projects, Costa Rica’s crypto future is just beginning.
