The World Bank turned down El Salvador’s request for assistance in establishing bitcoin as legal tender on Wednesday. The International Monetary Fund highlighted the cryptocurrency’s lack of transparency as well as the environmental risks connected with bitcoin mining as factors for its rejection. The World Bank stated that
While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings.
The World Bank did, nevertheless, mention that it can assist El Salvador in other areas, such as “currency transparency and regulatory processes”.
For the last two decades, the Central American country has used the dollar as legal money, forsaking its currency, the “colon.” The “official dollarisation” was carried out to reduce inflation and promote commerce with the United States.
However, on June 9, El Salvador’s parliament enacted a new law making Bitcoin legal money, which will go into effect in September, even though the digital token’s market value had reached as high as US$38,200 in the previous week.
Earlier on Wednesday, Salvadoran Finance Minister Alejandro Zelaya stated that his government has requested technical assistance from the Banco Mundial (the World Bank).
I want to announce that we have requested technical assistance from @BancoMundial so that like @BCIE_Org, they can accompany El Salvador in the implementation and regularization of #Bitcoin as legal tender.
The minister also said ongoing negotiations with the International Monetary Fund had been successful, although the IMF said last week it saw “macroeconomic, financial and legal issues” with the country’s adoption of bitcoin, as per the report from Reuters.
While President Nayib Bukele’s Bitcoin bill has generated a lot of enthusiasm among Bitcoin supporters all over the world, it has also generated a lot of criticism. Economist Steve Hanke warned that adopting Bitcoin as official money in El Salvador may “destroy the economy.”
Yesterday, El Salvador’s Minister of Labor and Social Welfare Rolando Castro denied claims that the ministry had begun discussing the option to use Bitcoin for employee salary payments, noting that it was “too premature to talk about wages.”
However, some businesses are eager to assist. Athena Bitcoin stated that it will work rapidly to deploy Bitcoin ATMs around El Salvador. On Twitter today, the corporation questioned Bukele if “1000 ATMs” were adequate, to which the President joked, “1,000? How about 1500?”
Meanwhile, Bukele stated that Bitcoin “will have 10 million potential new users” and is “the fastest-growing means to transmit 6 billion dollars in remittances each year.” El Salvador has a population of almost 6.5 million people who live abroad, primarily in the United States and send money back home. Remittances totaled $5.9 billion in 2020, accounting for 23% of El Salvador’s GDP.
Given that bitcoin permitted effective transfers without bank fees, remittances to the Salvadoran economy remain unclear as daily wagers and the general public may be inefficient in managing bitcoin transactions.
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