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Weekly Report - 17 June 2021 (WR-21-24)

EL SALVADOR: Banking on bitcoin?

In a world first, El Salvador last week approved legislation adopting the cryptocurrency bitcoin as legal tender alongside the US dollar, the country’s official currency. President Nayib Bukele trumpeted the law as key to improving financial inclusion and easing the transfer of remittances from abroad. However, its swift approval has raised multiple concerns due to the lack of transparency and debate surrounding the initiative, bitcoin’s volatility and possibility that its use could facilitate criminal activity, and questions as to how it would work in practice. The move has also cast uncertainty over the future of a financial arrangement with the International Monetary Fund (IMF), previously touted by the government as crucial to addressing the impact of the coronavirus (Covid-19) pandemic [WR-21-10] which has in turn set off international jitters.

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