The Bolivian government will incorporate cryptocurrencies and stablecoins into the financial system to promote the modernization of the country's economy. Bolivian Economy Minister Jose Gabriel Espinoza announced this news on Tuesday.
According to Reuters, banks will be allowed to hold cryptocurrencies on behalf of clients, enabling digital currencies to serve as legal tender for savings accounts, credit products, and loans.
Espinoza stated, "You cannot control cryptocurrencies globally, so you must acknowledge them and use them to serve you."
Like other countries in Latin America, Bolivia is plagued by high inflation of its fiat currency, prompting some residents to turn to stablecoins as a store of value and medium of exchange.
The race among nations to incorporate cryptocurrencies into their financial systems reflects the high-risk game theory cited by analysts, who say that the fear of missing out (FOMO) is a major driving force behind national adoption of cryptocurrencies.
According to data from the National Institute of Statistics of Bolivia, the average inflation rate of the country's fiat currency, the boliviano, exceeded 22% over the 12 months ending in October.
Businesses in the country have begun pricing in Tether's USDT, a dollar-pegged stablecoin, as an alternative to pricing in the local currency.
Bolivia's state-owned energy company YPFB announced in March that it is establishing a framework for cryptocurrency payments for energy import costs, although specific terms have yet to be defined, including which cryptocurrencies will be used for cross-border energy transactions.
In September, automotive manufacturers, including Toyota, Yamaha, and BYD, began accepting USDT as a payment method for their products in Bolivia to address the dollar shortage issue.
The dollar is crucial for international business and as a central bank reserve asset managing a currency peg to the dollar.
Stablecoins help meet this demand while overcoming local currency controls by allowing anyone with a mobile phone and cryptocurrency wallet to purchase and hold dollar-pegged tokens, bypassing centralized infrastructures like traditional banks that impose strict regulations.
High inflation and strict currency controls will only further entrench stablecoins as an alternative means of storing value in Latin America and other emerging economies plagued by high inflation.
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Original: “Bolivia to Integrate Cryptocurrencies and Stablecoins into Financial System”
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