One of the Big Three rating agencies, Fitch, is not happy with the recent decision by the El Salvadorian government to make Bitcoin a legal tender in the country.
According to experts, such a step will involve local banks in the processes of money laundering, terrorist financing and tax evasion. According to sources, all these phenomena are traditionally associated with crypt, so its widespread distribution within the country would allegedly lead to problems.
By tradition, let’s start with an explanation. The government of El Salvador recognized Bitcoin as a legal tender in the country in early June, in addition, the authorities announced their desire to invest part of the state’s reserves in the cryptocurrency. The main initiator of the idea was President Nayib Bukele. He even added laser eyes to his Twitter avatar – a sign of Bitcoin fans who believe in its continued growth and popularization.
A few days later, the local Congress approved the cryptocurrency as the national currency of the state. The corresponding bill received 62 votes out of 84, which means it was supported by the so-called super-majority.
At the same time, the government promised to distribute the equivalent of $ 30 in Bitcoin to every adult citizen of the country to get acquainted with the technology and its more widespread use.
Changpeng Zhao, the founder of the Binance exchange, reacted to the event. According to him, the recognition of Bitcoin as an official means of payment in some countries is another proof that the cryptocurrency rate will not collapse «to zero.» Here is a quote from him.
Still worrying about Bitcoin dropping to zero? Calm down and think. It will not happen. Apart from many important reasons, cryptocurrency is also a full-fledged means of payment in some countries.
However, analysts and financiers were less enthusiastic about the idea of a country. They again started talking about the connection of cryptocurrencies with scammers, money laundering and other old arguments that have been voiced for several years.
Criticism of El Salvador over Bitcoin
Earlier, the new strategy of the El Salvadorian government was met with a big negative response at the International Monetary Fund and the World Bank. Both organizations will not help the country with the integration of cryptocurrency and warn its citizens against the risks associated with digital assets. Fitch noted that Bitcoin has the potential to violate international anti-money laundering (AML) and terrorist financing standards, as well as contribute to tax evasion.
As we have already noted, such statements by critics of Bitcoin and cryptocurrencies in general are voiced regularly. For example, last week the chairman of the Central Bank of the Russian Federation Elvira Nabiullina did not directly recommend that Russian citizens get involved with cryptocurrencies. According to her, this is perhaps the most reliable strategy for losing money.
The links between organized crime and BTC are of particular concern to regulators. El Salvador’s President Nayyib Bukele has repeatedly denied contacts with MS-13 and Barrio 18, the two largest drug cartels in Central America. However, his critics are confident that he used their influence to come to power, Decrypt reports.
It is noteworthy that one of the partners of the El Salvadorian government in its plans is the Chicago-based company Zap Solutions Inc., whose Strike digital wallet is already used by some Salvadorans. Zap is not licensed to operate in most of the US states. This makes it illegal for Salvadorans to send funds via an app from the United States to their home country, which puts many expats in an awkward position.
El Salvador has not yet published a detailed guide to regulating cryptocurrencies, so this will be announced later. Fitch noted that the government had little time left to prepare a new regulatory framework, payment infrastructure and other subtleties. Last week, Bukele unveiled the state-sponsored cryptocurrency wallet Chivo and announced that every citizen of the country will receive $ 30 in BTC. However, it is not yet clear exactly how Chivo will work, and how much the state will control the wallet.
At the same time, as already noted by the sources, its use will not be mandatory or compulsory. Accordingly, citizens who do not want to get acquainted with the technology closer can ignore this initiative for the distribution of coins.
As a result, the arguments of critics boil down to the fact that now El Salvador has many more new unresolved problems than solutions to existing ones. However, the government will not completely switch to Bitcoin: it is assumed that the cryptocurrency will circulate in the country on a par with the US dollar.
We find it amusing to hear massive criticism of El Salvador’s decision to officially switch to Bitcoin from large organizations. Obviously, in this way international associations want to warn the leaderships of other countries from such actions – and their actions are also understandable. In this way, institutional representatives protect the dollar and other attributes of the traditional financial system. Nevertheless, in the event of a massive transition to decentralized assets, the services of many of them will no longer be needed, which means, in fact, we see ordinary attempts to protect our own interests.