The introduction of bitcoin as the official currency will not interfere with El Salvador’s negotiations with the IMF for a $ 1.3 billion loan, says the head of the country’s central bank, Douglas Rodriguez. Bloomberg writes about it.
The cryptocurrency will get rid of its reputation as a speculative asset and prove its usefulness as a full-fledged medium of exchange, Rodriguez predicted in an interview.
He even expects Bitcoin’s well-known volatility to help the country surpass its 9% growth forecast for 2021.
“We don’t see any risks. Only positive risks, ”said Rodriguez. He predicts that “Bitcoin will become a payment system, a system for financial institutions.”
Bitcoin is just a means of payment.
El Salvador is highlighting Bitcoin’s prospects in talks with the IMF on a $ 1.3 billion Extended Funding Facility, Rodriguez said.
The Fund is expected to publish its review of the financial and economic condition of El Salvador as early as next month, which could serve as the start for a new round of discussions. Investors are closely following the protracted negotiations.
They are especially interested in the IMF’s reaction to some of the controversial decisions of President Naib Bukele, such as the dismissal of the chief judges and the granting of official status to Bitcoin.
El Salvador has a huge debt and must negotiate an agreement with the IMF to gain access to international markets next year.
“We have openly explained to the IMF: for us … bitcoin is just a means of payment,” explained Rodriguez.
International lenders are more skeptical
The IMF warned in July that the use of cryptocurrency poses financial and regulatory challenges, and Moody’s Investors Service said the adoption of Bitcoin threatens the country’s cooperation with the Fund.
According to the JPMorgan Chase & Co. Index, El Salvador’s government bond risk premium is 975 basis points as of October 18.
An additional risk for the country is the pension reform project. Although Rodriguez has pledged that she will not change the retirement age and will guarantee a “decent pension,” he said it is not yet known whether the reform will nationalize part or the entire system.
According to Rodriguez, cryptocurrency opens up wider access to financial services for the population, because three quarters of El Salvador’s citizens do not have a bank account.
He believes that the cryptocurrency will contribute to the inclusion in the financial system of those whom banks refuse to serve due to low income or high risk.
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According to the President of Salvador Naib Bukele, the introduction of bitcoin will allow the country’s citizens to save about $ 400 million on international transfers.
Since the introduction of bitcoin last month, businesses in the El Salvadorian capital, from Starbucks and McDonald’s to hardware stores, have started accepting bitcoin to pay for their goods and services alongside the dollar, the country’s other official currency.
The central bank expects remittances from abroad to reach a record $ 6.3 billion this year. The increase in remittances could lead to a reassessment of the economic growth forecast to 10%.