What worries the Bank of Spain regarding Bitcoin and El Salvador
Bitcoin is not a new name for most nations now. Due to the popularity of Bitcoin, cryptocurrencies have also become very popular and many countries are now preparing to regulate or simply ban them. Then there was El Salvador which took Bitcoin to a whole new level by declaring it to be legal tender.
While Salvadorans were happy with the decision, the Bank of Spain was not impressed with its decision and issued a report by scrutinizing it.
The report entitled “EL PAPEL DE LOS CRIPTOACTIVOS COMO MONEDA DE CURSO LEGAL: EL EJEMPLO DE EL SALVADOR” [The role of crypto assets as legal tender: the example of El Salvador] was written by Sergio Gorjón. He is representative of the Central Bank of Spain of the General Directorate of Operations, Markets and Payment Systems.
In his report, Gorjón explained one of the major issues with El Salvador making Bitcoin legal tender, which was the opacity of the project. He stated,
“The opacity and lack of consensus with which the project was carried out was another limiting factor. Thus, the main global rating agencies have agreed to downgrade El Salvador’s sovereign credit rating.
El Salvador’s transition to Bitcoin adoption took place earlier in September and faced some issues. The government’s digital wallet tasked with facilitating transactions went temporarily offline, causing Bitcoin’s value to plummet.
Although the government offered $ 30 worth of Bitcoin to its citizens and companies like McDonald’s now accepted Bitcoin payments, the country lacked a functioning infrastructure.
International financial regulators like the International Monetary Fund and the World Bank had previously warned of the economic risks associated with Bitcoin’s volatility for the country. Another risk that the Bank of Spain highlighted in its report, was in line with one of the concerns expressed by Ethereum founder Vitalik Buterin.
Lack of crypto education has been one of the main reasons people get fooled in the market or fall prey to Ponzi schemes. Buterin had noted that forcing Bitcoin on such an uneducated and crypto-savvy population was risky and the Bank of Spain added noting,
“With just over 50% of its population having Internet access and a smartphone market share barely reaching 40%, El Salvador ranks last among Central American countries in terms of digital education level. .
Although the concerns expressed by the Central Bank were real and not new, its role in the public appeal in El Salvador is unfounded. Spain has seen a wave of crypto adoption, as PortAventura World, an amusement park, became the first in its domain to add optional Bitcoin payments to its customers.
Being one of the largest entertainment complexes in Europe, located in Spain, there were other businesses too open to accept Bitcoin payments. The concerns of the Bank of Spain will be relevant when it decides on the regulation of Bitcoin and other cryptos. Meanwhile, El Salvador continued to integrate Bitcoin into use profits on a pet hospital.