El Salvador implemented a law that accepted the use of Bitcoin as legal tender in September. While the law has seen notable success as displayed by the country’s president, Nayib Bukele, on Twitter, it has also received much criticism.
One of the notable figures in the financial sector, Andrew Baily, has expressed concern over the use of Bitcoin as legal tender in El Salvador. Bailey, who is the governor of the Bank of England, has supported the recent sentiments by the International Monetary Fund (IMF) regarding the same.
BoE governor critiques El Salvador’s Bitcoin law
Speaking at the Cambridge University student union last week, Bailey gave several reasons why he was concerned with the adoption of the primary cryptocurrency as legal tender in El Salvador.
“It concerns me that a country would choose it as its national currency… what would worry me most of all is, do the citizens of El Salvador understand the nature and volatility of the currency they have,” he stated.
Currently, El Salvador accepts both Bitcoin and the US dollar as legal tender after Bukele signed the Bitcoin bill into law.
Bailey also cited a recent warning by the IMF regarding the adoption of Bitcoin by the Salvadoran government. The IMF recently issued a report stating that Bitcoin should not be adopted as legal tender because of its high price volatility.
The institution further noted that the use of Bitcoin “as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability.”
Bailey also talked about a central bank digital currency stating that “there is a strong case for digital currencies, but in our view, it has to be stable, particularly if it’s being used for payments. That is not true for crypto assets.”
Bukele still pushing for the Bitcoin law
The Salvadoran president has been at the frontline of making sure that the Bitcoin law is a success. After Bailey’s criticism, Bukele took to Twitter to further state why the fiat currency system was also “concerning”.
In a tweet, Bukele stated, “Bank of England is “worried” about El Salvador adoption of Bitcoin? Really? I guess Bank of England’s interest in the well-being of our people is genuine. Right? I mean, they have always cared about our people. Always. Gotta love Bank of England.”
The warnings by Bailey and the IMF came shortly after El Salvador announced that it would be building a Bitcoin city. The Bitcoin city will run on green energy generated from a volcano. Moreover, the city will not charge any taxes apart from VAT tax. Moreover, the city will focus on attracting investments.
This is the latest initiative that El Salvador from its Bitcoin gains. After Bitcoin made notable gains earlier this month, Bukele announced that the country would use the generated profits to build 20 Bitcoin schools and a veterinary clinic in the country’s capital.
Moreover, Bukele announced that the country had bought an additional 100 Bitcoins during the recent price dip where Bitcoin fell to $53000. The country has already profited from this new investment, as Bitcoin started trading Monday at around $57,000.
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