Not too long ago, El Salvador announced that it would make bitcoin legal tender. Thus, the Central American nation became the first to permit bitcoin’s full use as a currency. However, now it looks like the country’s plans have hit a snag as the World Bank is saying it will reject El Salvador’s request.
The World Bank Will Not Help El Salvador
To be fair, El Salvador does not necessarily need permission from the World Bank to implement bitcoin’s status as a payment currency. However, things would have been easier for the country’s government if the World Bank were willing to cooperate. The institution put out the following statement explaining why it was neglecting El Salvador’s wishes:
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. We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes.
Over the years, El Salvador has predominantly relied on the U.S. dollar as its official currency. However, President Navib Bukele has praised the world’s number one digital currency in the past, claiming that it would potentially help to cut down on all transaction fees for El Salvadorians working out of the country and sending remittance payments home to their families.
At the time of writing, it is estimated that approximately 25 percent of the country’s population is situated within the United States. In 2020 alone, workers sent home approximately $6 billion. According to Bukele, a lot of that money went to transaction fees, and he is confident that bitcoin can help to alleviate some of the financial losses these families are experiencing.
In addition, he has stated that nearly three quarters of the nation is composed of underbanked or unbanked people, and thus bitcoin could assist these individuals in garnering the supplies and services they need to survive.
The law attempting to establish bitcoin as legal tender states the following:
The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out.
Not Everyone Is Happy
While President Bukele is excited about the prospects of bitcoin becoming a legal currency, several individuals and financial experts have decried this move, claiming that the environmental hazards presented by the bitcoin mining process are too big to ignore. In addition, some have claimed that this will make El Salvador vulnerable to criminal activity such as ransomware attacks, which are often at the heart of criminal operations seeking to get their hands on bitcoin they did not earn.
Bitcoin initially rose beyond $40,000 per unit following the announcement of El Salvador’s plans, but has since dropped to about $37,000 at press time.