World Bank rejects El Salvador’s request to implement bitcoin as legal tender

By: Will F.

The World Bank has rejected El Salvador’s request for help as the country seeks to become the first nation in the world to implement bitcoin as legal tender.

“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,” a spokesperson for the World Bank said.

“We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes,” the World Bank spokesperson added.

The statement comes after El Salvador’s Finance Minister Alejandro Zelaya said Wednesday that the country had approached the international lender for technical assistance on its adoption of bitcoin.

The country is keeping the US dollar also as its official currency, but President Nayib Bukele has touted the cryptocurrency’s potential to cut down on transaction fees for Salvadorans overseas.

About a quarter of El Salvador’s citizens live in the US and last year, they sent home more than $6 billion in remittances.

Bukele, 39, has said a chunk of those transfers are currently lost to intermediaries, and that more than a million poor families could benefit from the use of bitcoin.

He’s added that 70 percent of people in El Salvador don’t have a bank account and operate outside of formal financial infrastructure. Bitcoin could give those people access to the country’s financial systems, he’s said.

“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,” the law establishing bitcoin as official currency reads.

That means prices for goods and services across the country can now be shown in bitcoin, taxes can be paid with the crypto, and transactions in bitcoin will not be subject to capital gains tax, the law says.

But some specifics remain murky when it comes to rolling out bitcoin, which is known for its extreme volatility.

Also, critics have often decried the environmental impact of bitcoin mining, the energy-intensive process that involved banks of computers doing calculations to come up with the virtual coins.

Others have also criticized the use of bitcoin by criminals like ransomware hackers to maintain their anonymity and avoid being traced.

The exchange rate with the US dollar “will be freely established by the market,” the law says.

The state will “promote the necessary training and mechanisms so that the population can access bitcoin transactions,” according to the law.