El Salvador’s call for technical assistance in making Bitcoin legal tender denied by World Bank
The country’s economy is largely reliant on remittances, or money brought home from abroad, which account for around 20% of the country's GDP
The World Bank refused El Salvador's request for assistance in adopting bitcoin as legal tender on Wednesday. The international monetary authority highlighted the cryptocurrency's lack of transparency and the environmental risks connected with bitcoin mining as factors for its rejection.
El Salvador President Nayib Bukele has previously presented legislation to make his country the world's first to use the digital token as legal money in the economy along with the US dollar.
The World Bank's decision may imply that the country will have difficulty meeting its goal to ensure that Bitcoin is accepted nationally within the next three months.
Salvadoran Finance Minister Alejandro Zelaya stated that current discussions with the International Monetary Fund had been fruitful, despite the fact that the IMF stated last week that the country's acceptance of bitcoin would cause "macroeconomic, financial, and legal issues."
El Salvador became the first government to recognise bitcoin as legal cash this month, with President Nayib Bukele praising the cryptocurrency's potential as a remittance currency for Salvadorans living abroad.
The country’s economy is largely reliant on remittances, or money brought home from abroad, which account for around 20% of the country's GDP.
For the last two decades, the country has used the dollar as legal money, forsaking its own currency, the "colon." The “official dollarisation” was carried out in order to reduce inflation and promote commerce with the United States.
However, on June 9th, El Salvador's parliament enacted a new law making Bitcoin legal money, which will go into effect in September, despite the fact that the digital token's market value had reached as high as US$38,200 in the previous week.
Investors have recently requested greater premiums to retain Salvadoran debt, owing to rising fears about the fulfilment of the IMF agreement, which is critical to filling budget shortfalls until 2023.
According to the new rule, every firm must accept Bitcoin as legal money for products or services, unless it lacks the necessary equipment and technology to execute the transaction.