El Salvador's Bitcoin Move Is Causing Uneasiness

El Salvador's daring Bitcoin experiment does not sit well with financial institutions, Bank of England’s Governor expresses concerns

Chung Yee
December 1, 2021
Blockchain News

Bitcoin Experiment 

Bank of England’s (BOE) Governor, Andrew Bailey raised concerns about bitcoin being used as legal tender in El Salvador in his address to the Cambridge University student union on Thursday.

Bailey said, “It concerns me that a country would choose it as its national currency. What would worry me most of all is, do the citizens of El Salvador understand the nature and volatility of the currency they have.” 
Source: The former CEO of the UK’s Financial Conduct Authority (FCA) calls El Salvador’s Bitcoin experiment an ‘untested strategy’

* International Monetary Fund (IMF) warned El Salvador of consequences in choosing bitcoin as its legal tender. 

* El Salvador’s decision to choose Bitcoin as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability.

* El Salvador’s President, Nayib Bukele, announced plans on Nov. 20 to build the world’s first “Bitcoin City,” funded by Bitcoin-backed bonds. 

* In a reply to the comments made by Bailey, Nayib responded on Twitter

El Salvador Chooses Self Help

* El Salvador is a small Central American country with a population of 6 million people. 

* It suffered a 12-year civil war that only ended in 1992. 

* The country has used the US Dollar for 20 years before accepting Bitcoin as its legal tender with hopes of reviving a struggling economy. 

* Its President, announced that the country will be issuing $1 billion worth of ‘volcano bonds’ backed by Bitcoin. Half of the money raised will be used to buy Bitcoin in the market. 

* After the 5-year lock-up period, El Salvador would start selling some bitcoin used to fund the bond. 

Bitcoin is Financial Freedom

* President Nayib Bukele’s controversial financial policy is stirring dissent domestically. 

Source: Nayib Bukele’s decision to adopt Bitcoin as its legal tender is facing a lot of backlash both domestically and internationally

* El Salvador is left to choose between a decentralized protocol that imposes no conditions and is fast becoming a mainstream asset or to enter into a loan agreement with the IMF and be bound by the conditions of the loan.  

* Bitcoin promises more opportunities through investments by institutions seeking crypto-friendly jurisdictions. At the same time, Bitcoin can play its role as a reliable store of value and also as an appreciating asset. 

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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