Reserves and Reservations

El Salvador has been a pioneering nation in cryptocurrency adoption, famously becoming the first country in the world to recognize bitcoin as legal tender when President Nayib Bukele approved its use in 2021. This move has proved incredibly lucrative for the country; however, recent reports suggest El Salvador might revise its bitcoin-centric policies as it seeks a $1.3 billion loan from the International Monetary Fund (IMF).

President Bukele’s decision in 2021 wasn’t a rash one, despite the criticism it received for potential risks around the volatility of crypto and digital access requirements. El Salvador's Bitcoin Law was implemented to promote financial inclusion, attract investment, and reduce remittance costs. Recently, as BTC surpassed US$100,000 in value, the president revealed how this had paid off, showing that the country’s unrealized profit on bitcoin had surpassed US$333 million.

Now though, with El Salvador looking for an IMF loan, the Financial Times has reported that sources claim one of the conditions of the country’s application being accepted is that it changes the law to make accepting bitcoin voluntary, rather than a legal obligation. This is not the first time that the IMF has pushed back on El Salvador’s use of bitcoin, with warnings against the cryptocurrency being given legal status issued just months after it happened.

There are a number of issues that the IMF and others have with the legal adoption of crypto, including:

• Cryptocurrency volatility makes them unsuitable for pricing goods and services or for use in government revenues and expenditures; setting taxes for example in both crypto and dollars (El Salvador’s other accepted currency) could prove problematic for either side as the price of bitcoin fluctuated. This volatility has the potential to significantly destabilize fiscal planning and economic predictability.
• Fears over money laundering and terrorism financing in a pseudonymous system, although the transparent nature of the Bitcoin blockchain can actually be a detriment to criminal activity, and has been for some time.
• Cryptocurrencies can erode the effectiveness of monetary policy, as governments lose control over money supply and interest rates.
• The energy-intensive nature of bitcoin mining, while mitigated in El Salvador thanks to the country’s use of geothermal energy, remains a sticking point for global adoption, and is brought up by many of those against crypto’s use (although there is an irony in the IMF calling crypto mining wasteful when the agency is based in the US - where previously christmas light power consumption surpassed the yearly energy usage of El Savador).

Regardless, the requirement of changing bitcoin from legal tender to an optional payment alternative is likely to have little impact on the day-to-day lives of El Salvadorians, particularly when uptake of the digital currency has remained low and the option is likely to remain in places where people were already using it. Moreover, there seems to be no indication that President Bukele will change his policy on accumulating bitcoin, and others are investigating the possibility of doing the same, even though some organizations prove to be more hesitant about such a move.

As bitcoin’s price and adoption continue to rise, we should be doing everything possible to ensure that it can integrate with existing structures and is made simple, safe and secure enough for anyone to use. When it comes to proving identity and ensuring that only legitimate, verified and suitable people are able to enjoy the benefits of blockchain technology and the many projects that are built on top of it, Blockpass is situated and prepared to provide robust, reliable and flexible KYC, AML, KYB and more. With Blockpass’ identity verification services, the constantly evolving and shifting regulatory landscape of crypto can be navigated with ease, and any real, trusted person can experience why so many like President Bukele are bullish on bitcoin, or any of the other projects that use the technology as a base.

About Blockpass

Ditch tedious onboarding and say hello to seamless compliance with Blockpass, the ultimate turnkey solution for KYC, KYB, and AML. Experience the market's most efficient and cost-effective compliance suite, built by seasoned compliance veterans and crypto-natives. Automate compliance processes, eradicate fraud, and onboard globally with confidence. Verify businesses worldwide, launch bank-grade verification for your organization, and instantly activate compliant KYC/AML for DeFi, exchanges, token launchpads, NFT mintings and beyond. Through Blockpass’ decentralized network of a million pre-verified crypto-enthusiasts and a thousand pre-verified businesses, you can expand your reach effortlessly. Leverage Advanced KYC BotTM for intelligent remediation, On-Chain KYC® for data-free anonymity, and Unhosted Wallet KYCTM to meet Crypto Travel Rule regulations. Join Animoca Brands, Cardano, Polygon, Chainlink, Delta Exchange, National Geographic, TinyTap, Seedify, ChainGPT, Iskra and many more in partnering with Blockpass for compliance you can trust, growth you can accelerate and an experience you can enjoy. Join the cutting edge of secure, streamlined onboardings.

Learn more and engage the Blockpass team via the following:

Website: http://www.blockpass.org

Email: [email protected]