- El Salvador is trying to negotiate a $1B loan from the IMF
- The global lender is opposed to the country’s decision to grant Bitcoin official legal tender status.
- President Bukele has said that accepting BTC as legal tender will open financial options and opportunities to the more than 70% of El Salvadorians who currently do not have any access to banking services of any kind.
- If the IMF loan does not come through, El Salvador could be forced to table its transition.
El Salvador’s government has been under fire from critics who have been publicly bashing the country’s recent decision to adopt Bitcoin as legal currency.
Criticism has been coming from all corners. During a recent media interview, a former economist under the Reagan administration stated that the move could collapse that country’s economy.
“It has the potential to completely collapse the economy because all the dollars in El Salvador could be vacuumed up, and there’d be no money in the country. They don’t have a domestic currency,” said Steve Hanke, a professor of applied economics at Johns Hopkins University.
Both the World Bank and International Monetary Fund (IMF) piled on in opposition to the move.
"We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes. 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," said a World Bank spokesperson in an email message to Reuters.
El Salvador is still trying to negotiate a $1 billion loan from the IMF, however, the global lender is still opposed to that country’s decision to grant Bitcoin official legal tender status.
“Adoption of bitcoin as legal tender raises a number of macroeconomic, financial, and legal issues that require very careful analysis. We are following developments closely, and we’ll continue our consultations with the authorities,” said Gerry Rice, IMF spokesperson.
Despite such Bitcoin backlash, El Salvador’s President, is defiantly optimistic about the decision. During a YouTube interview with Bitcoin influence Peter McCormack, Presiden Nayib Bukele reaffirmed that it’s an ambitious but necessary step for his country.
"It looks bulletproof. I'm pretty sure this is going to work, not only for us but for humanity, because it is a leap forward for humanity.(We will be) at least becoming a little less dependent on the output of new dollars, and the new inflation that's coming with all those new dollars.”
Bukele has said that accepting Bitcoin as legal tender will open financial options and opportunities to the more than 70% of El Salvadorians who currently do not have any access to banking services of any kind. He has publicly stated that his country has mobile device penetration of more than 140% which has prepared it for rapid adoption of the disruptive, digital cryptocurrency that is Bitcoin.
On the Flipside
- A key concern regarding the success or failure of El Salvador’s full adoption of Bitcoin by September 2021 is whether or not the country can remain solvent until then.
- The World Bank has flatly rejected any assistance for El Salvador in its monetary migration to Bitcoin, and negotiations with the IMF for a much needed $1 billion bridge loan are not solidified.
- If the IMF loan does not come through, El Salvador could be forced to table its transition.
- Or might El Salvador become the first sovereign nation to take advantage of crypto DeFi options?
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