Bank the unbanked with yet another bank. Bitcoin fractional reserve banking system 2.0.

In El Salvador, over 50% of the population doesn't have a bank account and, as such, can't participate in the modern banking system and its advantages. Salvadorians have been relying on the cash economy until now, which is why you will see many informal markets flourishing in El Salvador. Since those markets only use cash, the government can't collect taxes from those transactions, and banks can't give loans because they don't know their customer's income.

Bitcoin Chivo wallet will be a good way for the government to track merchants' incomes and expenses. The government may see an income increase because many informal industries will have to report their taxes because their activities are recorded. After all, some merchants decided to utilize Chivo bank services.

Chivo to Chivo transactions are free but getting outside that system involves some fees involving Bitcoin transaction fees, but Salvadorians can use other custodians and wallets. But those wallets will lose the ability to exchange into dollars immediately and rely on external exchanges, which can be expensive. So the government will have a stream of data coming from users. The government can use such data to detect and detour tax evasion. Big players with more oversized pockets will afford on-chain fees and other Bitcoin infrastructure fees like opening and having a well-connected LN node. Pretty much big money will find a way to avoid paying taxes or reporting any activity that later could be used to collect and determine tax liability.

But the small investor will choose to use custodians that don't necessarily report to the government, like Wallet of Satoshi services, so tax evasion is still possible in El Salvador. But those wanting to grow their business would like to reflect those taxes to the government to raise their businesses using credit.

Now enter loans.

Suppose the informal market in El Salvador adopts Bitcoin and saves on Bitcoin. In that case, they can accumulate satoshis using custodians that can later be settled on a single transaction to avoid paying high network fees and send those savings to services like Nexo and Celsius. Where those seeking loans could get some loans to grow their businesses, or those users relying on custodians could end up losing all of their money. I guess government custodians are next.

Bitcoin in El Salvador will open the door for the informal economy to get formal, and as such, the possibility of expansion by utilizing credit is possible. There are risks when borrowing and putting your crypto as collateral. But eventually, banks regular banks that are will offer loans to those who have small businesses that transact on Bitcoin because the banks will have proof of income.

Once you have proof of income is just a matter of time before you can start building credit to expand your business, the government will be able to track revenue to collect taxes. Still, it will also provide proof that a person or company has a certain income, and as such, banks could offer lines of credit to people with probable sources of revenue.

A superior way of banking.

Not to mention that the introduction of Bitcoin also means that some Salvadorians will be able to invest in the altcoin market. Salvadorians will discover sooner or later that their legal currency has high fees and, as such, may decide to invest in altcoins that may have a future because of the fundamentals. If the government subsidies the transition cost, that same government will eventually charge you back in another way or form. Coins like Bitcoin Cash could be an excellent opportunity for those seeking gains or a more peer-to-peer experience, if not insurance against BTC. I do think that many more countries could adopt Bitcoin as legal tender, which will open the door for those willing to invest in altcoins.

Getting Bitcoin was a challenging endeavor in the past in El Salvador, but now citizens of that country will have an easy on and off-ramp. I am pretty sure that eventually, some centralized exchanges will offer their services to Salvadorians. It will be much easier to use Decentralized Exchanges like SmartBCH offers, like BenSwap and MintWwap.

Bitcoin Cash and its sidechain SmartBCH could be the next step that Salvadorians and many other nations seeking legal tender cryptocurrencies could take. Once Bitcoin is legal tender in the territory, it is easier for the whole ecosystem to prosper. After all, you can always choose to invest your BTC into other assets that may have a greater return.

Banking the unbanked with yet another bank is just the first step. The second step is custodian accounts that report your activity and can be seized anytime for any reason. That only happens on Bitcoin Core because, with Bitcoin Cash, you always host your private keys.