El Salvador’s credit rating might be harmed as a result of Bitcoin adoption: S&P Global

  • El Salvador’s acceptance of Bitcoin as legal money, according to S&P Global, has had immediate negative consequences for the country’s credit rating
  • The dangers of adopting bitcoin as legal money in El Salvador appear to exceed the possible advantages, S&P stated, highlighting the Bitcoin Law’s immediate negative consequences for the country’s credit rating
  • Despite the country’s low rates of crypto-literacy, President Nayib Bukele’s leadership and administration have received opposition for passing the Bitcoin Law, despite the country’s high popularity ratings

El Salvador’s acceptance of Bitcoin as legal money, according to S&P Global, has had immediate negative consequences for the country’s credit rating. Standard and Poor (S&P) Global believes El Salvador’s credit rating has been adversely damaged as a result of the government’s adoption of a Bitcoin Law on Sept. 7 that recognizes Bitcoin as legal money across the country. El Salvador’s acceptance of Bitcoin, according to a Reuters article dated September 16, exposes the country’s economy to substantial financial risks and might cause problems for the country’s leading business. El Salvador’s prospects of obtaining a $1 billion loan deal from the International Monetary Fund may also be harmed, according to the rating agency (IMF).

The dangers of adopting bitcoin as legal money in El Salvador appear to exceed the possible advantages, S&P stated, highlighting the Bitcoin Law’s immediate negative consequences for the country’s credit rating. In the run-up to the BTC’s adoption, international credit rating organizations are pessimistic about El Salvador’s ranking. Prior to Salvadoran President Nayib Bukele’s announcement in June of this year that the nation will adopt BTC as legal money, Fitch had assigned El Salvador a B- in April 2020, indicating that the country was high risk and had a negative outlook. El Salvador’s credit score was last assessed by S&P on December 28, 2018, and given the drastic shift in the country’s monetary policy, it may be ready for an update.

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Despite the country’s low rates of crypto-literacy, President Nayib Bukele’s leadership and administration have received opposition for passing the Bitcoin Law, despite the country’s high popularity ratings. There also appears to be pushback from financial institutions like the World Bank and the International Monetary Fund, which have both expressed caution about the acceptance of BTC as legal money this month. While the IMF is currently in talks with El Salvador on a possible assistance program, spokesman Gerry Rice said in a news conference on Sept. 16 that the fund’s position that the effects of BTC adoption may be “dire” hasn’t changed. 

The possibility of an IMF program for El Salvador is being considered. The goals are obvious once again: development, financial stability, and so forth. He thinks they’ve been quite clear in their public remarks on the specific Bitcoin issue, Rice added. While the government approached us for assistance on Bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings,” a World Bank spokeswoman told Reuters on Sept. 7.

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Andrew Smithhttp://thecoinrepublic.com
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing

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