World Bank sends clear message on Bitcoin with refusal to assist El Salvador
The World Bank is sending a message to other countries that it will not help them adopt cryptocurrencies in its refusal to help El Salvador implement Bitcoin as legal tender, according to experts at the Centre for Banking Research at the Business School (formerly Cass).
The Central American nation recently passed law to recognise Bitcoin as legal currency alongside the US dollar, citing reasons of practicality for Salvadoreans living abroad sending money home.
The move has, however, been criticised by many with fears on the impact of the dollar and controversies around environmental harm caused by the Bitcoin mining process.
Dr Francesc Rodriguez Tous, Lecturer in Banking at the Business School, explained the World Bank’s motives for denying technical support for the rollout.
“The World Bank gives both technical and monetary assistance to countries, and can therefore impose conditions and support to those countries if they wish to receive it.
“If it is unsatisfied it can refuse this support, as it appears to have done in this instance. That said, I am not sure this necessarily means they would refuse El Salvador monetary support in future if needed, despite the increased sovereign risk.
“The World Bank claims that it rejected the request based on transparency and environmental concerns. Transparency concerns stem from the fact that anyone can operate Bitcoins anonymously which makes them difficult to track. Environmental concerns refer to the increasing amount of electricity consumed in mining cryptocurrencies.
“I share these concerns, but I’m not sure the World Bank applies these principles in all cases when deciding on whether or not to assist.”
The decision to deny technical support sends a strong message to other countries looking to follow El Salvador’s lead, and Professor Thorsten Beck, Professor of Banking and Finance at the Business School expects repercussions on the value and reputation of Bitcoin.
“Such a public rebuke from the World Bank is likely to impact negatively on the value of Bitcoin, because of the message it sends to others who consider taking similar action with their domestic currencies.
“Refusing technical support ultimately makes implementation of Bitcoin more of a challenge for El Salvador. In taking these actions, the World Bank is hoping to deter others from doing the same.”
All quotes can be attributed to Dr Francesc Rodriguez Tous, Lecturer in Banking and Professor Thorsten Beck, Professor of Banking and Finance at the Centre for Banking Research, the Business School (formerly Cass).