As El Salvador strives to be the first in the world to adopt bitcoin as legal currency, the World Bank has denied the country’s request for assistance.
A World Bank spokesman told Reuters, “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.”
Roadblocks for El Salvador’s Revolutionary Move
The announcement comes after Finance Minister Alejandro Zelaya of El Salvador said Wednesday that the government has requested financial help from the international lender for its plan to use bitcoin.
The government of El Salvador has chosen to retain the US dollar as the official currency, but President Nayib Bukele has highlighted the use of cryptocurrencies to save Salvadorans money on transaction fees.
Both the World Bank and other major financial institutions have expressed doubts about the move to make El Salvador’s currency, the U.S. dollar, the country’s legal tender.
Several “macroeconomic, budgetary, and legal issues” raised by the Salvadoran government’s recent move need thorough study, according to the IMF.
Additionally, JP Morgan criticized the country’s choice.
Moreover, a quarter of El Salvador’s population resides in the United States, and last year, they remitted over $6 billion in remittances back to their families in El Salvador.
Bukele has stated that more than a million impoverished households might profit from using bitcoin as a money transfer method.
El Salvador’s Need for Bitcoin
In El Salvador, 70% of the population does not have a bank account and conducts all financial transactions outside of traditional banking structures. Individuals who use Bitcoin may offer people in impoverished countries access to the country’s financial institutions, according to him.
Furthermore, 70% of El Salvador’s population doesn’t have a bank account and work in the informal economy.
Financial inclusion is not only a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment and secure transactions.
— Nayib Bukele 🇸🇻 (@nayibbukele) June 6, 2021
Bukele is well-liked, and his populist Nuevas Ideas party just won a landslide victory. On the other side, the new legislature has been criticized for removing the attorney general and senior judges.
The US Agency for International Development withdrew funding from El Salvador’s national police and a public information agency as a result of the action, shifting cash to civil society organizations.
El Salvador is one of just a few countries in the world whose official currency is the US dollar. Tensions between El Salvador and the United States have lately increased as a result of recent changes to the Central American country’s judicial system.