bitcoinization

Bitcoinization refers to the process by which a country or region adopts Bitcoin as its primary currency, or a significant portion of its economic activity. This can occur either officially through government decree, or unofficially through widespread public adoption. The term is derived from the cryptocurrency Bitcoin and the suffix "-ization," signifying transformation or adoption.

Countries that have experienced or are considering Bitcoinization often do so to combat hyperinflation, stabilize their economies, or circumvent capital controls. In environments where the local currency is rapidly losing value, citizens may turn to Bitcoin as a more stable store of value and medium of exchange. This can be driven by a loss of faith in the national currency and monetary authorities.

The most prominent example of official Bitcoinization is El Salvador, which in September 2021 made Bitcoin legal tender alongside the US dollar. This move aimed to foster financial inclusion, attract investment, and reduce remittance costs. However, the implementation has faced challenges, including price volatility of Bitcoin and varying levels of public acceptance and understanding.

Unofficial Bitcoinization can happen organically in countries with unstable economies or restrictive financial systems. Individuals and businesses may choose to use Bitcoin for everyday transactions, savings, or international trade, bypassing traditional banking and currency systems. This decentralized adoption can be a grassroots response to economic instability or government policies. The long-term implications of widespread Bitcoinization are still being debated among economists and policymakers.