El Salvador’s historic decision to make Bitcoin legal tender is an “interesting experiment,” according to Benoît Cœuré, a French economist and Head of the Innovation Hub at BIS.
On Wednesday, the Central American country became the first country to adopt bitcoin as its national currency, claiming that it will make it easier for Salvadorans living abroad to transfer money home.
El Salvador is principally a cash economy, with around 70% of the population lacking bank accounts or credit cards. Bitcoin has a market cap of $680 billion. If 1% of it is invested in El Salvador, it will improve its GDP by 25%
El Salvador’s decision to declare Bitcoin legal money in the country has prompted criticism from traditional financial gatekeepers, including the Bank for International Settlements (BIS).
However, During the launch of the BIS’s fourth innovation hub in England on Friday, Cœuré stated that,
We have been clear at the BIS that we don’t see bitcoin as having passed the test of being a means of payments. Bitcoin is a speculative asset and should be regulated as such
Cœuré’s referred to Bitcoin as the “evil spawn of the 2008 financial catastrophe” in November 2018. Cœuré’s remarks regarding the necessity for rigid crypto rules are foreseen within the BIS, with general manager Agustín Carstens consistently advocating for stricter cryptocurrency restrictions.
Cœuré’s remarks come in the wake of the International Monetary Fund’s (IMF) harsh warnings in the aftermath of El Salvador’s choice. In response to the announcement, the IMF noted that the decision might have severe legal and financial consequences.
Reports indicate that Bitcoin could be a topic of debate between the IMF and El Salvador’s president on a proposed $1-billion program.
Rapid improvements in private sector electronic payments and decreased usage of cash, hastened by COVID-19, have compelled central banks to contemplate developing digital versions of their legal tender, known as central bank digital currencies.
Recently in a Press Release, it was stated that The Basel Committee would organize a debate on the regulatory treatment of crypto-asset exposures, and the Committee welcomes comments on the proposals, which should be submitted by 10 September 2021.
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