US authorities have called the recognition of Bitcoin as El Salvador’s currency a threat to their financial system. Why?
US senators have introduced a bill requiring the State Department to write a report on the legal acceptance of Bitcoin in El Salvador and develop a plan to “mitigate potential risks to the US financial system”. The Cryptocurrency Accountability Act in El Salvador was introduced this week by Jim Risch, Bob Menendez and Bill Cassidy. In response, El Salvador’s President Nayib Bukele voiced his opinion on the bill on Twitter, and traditionally did so rather harshly. We go into more detail on the situation.
It's not the first time the US government has commented on crypto in a negative context. In particular, in October 2021, President Joe Biden's administration said that digital assets could significantly weaken the US sanctions program. Still, crypto makes it easy to transfer value anywhere in the world - and officials are clearly not happy with that. Read more about the administration's position in a separate piece.
US flag
What Bitcoin is being criticized for
In a press release, US senators said El Salvador’s law recognising Bitcoin as legal tender “raises serious concerns”. According to Decrypt’s sources, their proposed bill, if passed, would give the State Department 60 days to prepare a report on the state of the crypto-sphere in El Salvador. As a reminder, BTC gained legal status in the country on the seventh of September 2021 thanks to the strong support of President Buquelet.
The details of the senators’ bill were commented on by one of its sponsors, Idaho Republican Jim Risch. Here is his rejoinder.
El Salvador’s adoption of Bitcoin as legal tender raises serious concerns about the economic stability and financial integrity of a vulnerable US trading partner in Central America. This new policy could weaken US sanctions by empowering malevolent actors like China and organised criminal organisations.
In other words, Americans fear that the strong introduction of Bitcoin into El Salvador’s economy will limit US tools to put pressure on the country. The bill could also serve as a “warning” to crypto enthusiasts in America. Still, what’s happening now is a clear hint that they can hardly count on such privileges.
El Salvador’s President Nayib Buquele
The politicians’ initiative has angered President Bukele, as he revealed on his Twitter. Here is the president’s quote.
OK boomers… You have exactly zero jurisdiction in a sovereign and independent country. We are not your colony or backyard. Stay out of our domestic politics. Don’t try to control what you cannot control.
Note that this is not the first time El Salvador's representatives have defended the major cryptocurrency. For example, earlier this month, the country's Economy Minister Alejandro Zelaya made it clear that no one will force them to do anything with BTC. In doing so, the official's remark was in response to the International Monetary Fund's recommendation to abandon Bitcoin as the national currency. Read more on this in a separate piece.
Earlier, the adoption of Bitcoin in El Salvador had already been criticized by well-known economists, banks and international organizations. However, none of this has stopped Buquelet from making his plans a reality. He has also announced the launch of a bond issue backed by crypto. However, direct investment in BTC by the Salvadoran government has so far only brought unrealised losses to its budget against the background of what is happening in the coin niche.
Overall, this week proved to be a hot one for critics of the crypto industry, with a business partner of celebrity investor Warren Buffett named Charlie Munger standing out among them. During a question-and-answer session at the Daily Journal’s Annual Meeting of Journalists, Munger was quite blunt about digital assets. Here’s his rejoinder, in which the investor shares his attitude towards digital assets.
I certainly haven’t invested in cryptocurrency. I’m proud to have avoided it. It’s like some kind of venereal disease.
Investor Charlie Munger
The 98-year-old financier went on to list the reasons why he hates Bitcoin – tax evasion, crime financing, fraud and so on. In short, it’s a standard set of complaints about BTC that bankers, officials and other critics of the crypto have been voicing for years. Perhaps Munger dislikes cryptocurrencies so much because he just hasn’t had time to make money from them?
He and Buffett made a serious mistake back in the day – they didn’t have time to appreciate the innovation potential of the internet, and hence barely invested in related companies. Now history is repeating itself, but only for cryptocurrencies. And all they can do is openly criticise digital assets.
We believe that the US authorities' concerns about the use of Bitcoin in El Salvador do have merit. After all, crypto is decentralized, which means officials have no ability to influence it. And since the opposite is happening to the dollar around the world, officials are consciously trying to prevent further development of digital assets and are coming up with all sorts of reasons to do so.
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