The International Monetary Fund (IMF) once again drew attention to the initiative of the El Salvadorian government to make Bitcoin a legal tender in the country. Recall that the law, previously announced by President Nayyib Bukele and adopted by the local government, comes into force on September 7 .
It has caused a lot of controversy both among financial analysts and the local population, some of whom oppose the adoption of BTC. Let’s talk about the situation in more detail.
The recognition of Bitcoin as an official means of payment in El Salvador will be one of the main events of September. Note that the attitude to the decision of the authorities in the world is different. For example, in early August, Bank of America employees praised the initiative and saw it as positive.
According to the bank’s analysts, the use of BTC to transfer funds will help the citizens of the country reduce the cost of bank fees, which are usually quite significant. According to experts, the money saved will go to other expenses and stimulate the development of the economy.
At the same time, representatives of the Fitch rating agency do not consider the idea to be successful. In their opinion, some insurance-type companies will simply not be able to interact with Bitcoin due to its volatility, that is, sharp changes in value. In this case, the monetary reserves of the company will be under threat, which in turn will create risks for its existence as a whole.
What is Bitcoin criticized for?
The IMF’s repeated warning appeared on the IMF’s official Twitter account. Here is a quote from this post in which representatives of the organization criticize what is happening. The cue is from Decrypt.
Privately issued crypto assets like Bitcoin carry significant risks. Attempts to make them the equivalent of the national currency will lead to inevitable negative consequences.
Note that it is strange to consider Bitcoin as a “privately issued cryptoasset”, since the emission of cryptocurrencies is carried out in the most transparent way. Recall that new bitcoins are formed thanks to mining, since the miner who mined the block receives a fixed reward from the coins just created by the network. The block reward is currently 6.25 BTC, but around 2024 it will halve to 3.125 BTC. This procedure is called halving.
Most likely, representatives of the fund are unhappy with the actions of early miners who mined large amounts of cryptocurrencies and were able to seriously get rich on this. However, this is also a controversial situation. Firstly, after the launch of the Bitcoin blockchain, it was possible to mine cryptocurrency on ordinary processors, that is, there was practically no threshold for entering the niche. Secondly, the opportunity to get BTC at a low price is a reward for the early participation of fans of decentralization in the cryptocurrency industry. There is no point in considering their activity dishonest, because in fact anyone could join the niche.
For the first time, the IMF criticized the decision of the El Salvadorian government back in July. According to the experts of the fund, a too bold strategy of the president and officials can lead to a whole economic catastrophe, since “the cryptocurrency market is too unstable.” The IMF’s point of view is consonant with the criticism of the Fitch rating agency and the World Bank experts. Their claims are the same instability of Bitcoin, which in the future can have a very negative impact on the country’s economy .
According to sources, it will be officially possible to pay with Bitcoin for goods and services in El Salvador from September 7. The country’s Congress has allocated $ 150 million to develop and maintain a payment support infrastructure for local businesses. True, not all local businessmen are ready to immediately use BTC in their activities.
Rapid adoption of Bitcoin in El Salvador could have its obstacles. The main one is that a significant part of the population simply does not understand how to use the crypt. Because of this, the process of its spread can greatly slow down the pace. In addition, growing criticism from international organizations could eventually lead to sanctions.
We believe that the recognition of Bitcoin as an official means of payment within El Salvador is a historic event. Even if the majority of citizens do not start using cryptocurrency, its gradual adoption will have a great impact on the reputation of digital assets. And this will create a reason for the purchase of coins by both large companies and other states. Perhaps in this case, mass adoption of cryptocurrencies will indeed be possible.