A look at the BTC initiative in El Salvador: a great discussion of macroeconomic, financial and legal issues

Experts are divided on the adoption of Bitcoin in El Salvador, as observers say its use in money laundering and illegal transactions is contrary to the long-term opportunities in current macroeconomic conditions.

A look at the BTC initiative in El Salvador: a great discussion of macroeconomic, financial and legal issues

On June 9, El Salvador became the first country in the world to recognize bitcoin as legal tender when its Congress voted to approve a proposal submitted by the president to make bitcoin legal tender. El Salvador’s Bitcoin initiative has sparked much attention and heated debate on Bitcoin-related laws and financial implications.

Experts are divided on the adoption of bitcoin in El Salvador, as observers say its use in money laundering and illegal transactions is contrary to the long-term opportunities in current macroeconomic conditions. Some experts also believe that it is good to see El Salvador become the first country in the world to officially adopt digital currency. This is a big step forward for Bitcoin and cryptocurrencies, as it is the first time a nation-state has approved cryptocurrencies as legal tender.

Positive Embrace
El Salvador’s President Nayib Bukele noted that the country’s acceptance of Bitcoin as legal tender became one of the 14 most important events in its 12,000-year “monetary history. Google searches for “real estate in El Salvador” have also spiked due to the Bitcoin effect.

As El Salvador passed a law making Bitcoin legal tender, many Latin American parliamentarians expressed interest in Bitcoin. These countries include Paraguay, Argentina, Panama, Brazil and Mexico. The Tonga Islands and Tanzania have also reportedly expressed interest in bitcoin. Panamanian congressman Gabriel Silva has also said he is working on a proposal to include bitcoin and other cryptocurrencies within the country’s legal tender.

In a June 13 interview on the show, Alex Gladstein, chief strategy officer at the HumanRightsFoundation, said that El Salvador’s choice of bitcoin as legal tender makes a lot more sense than establishing a digital currency that governments can control more. Bitcoin’s role as a fast, borderless payment tool is becoming increasingly important. “Most people don’t think of bitcoin as money, but what if it did become money? What would that look like? That’s exactly what we’re seeing happen. Bitcoin has certain remarkable properties that allow it to create connections between people in different parts of the world. So my view is that we’re entering the next narrative phase of Bitcoin, where a country is enacting or adopting Bitcoin, not as a balance sheet asset, but as legal tender.”

In addition, Tonga may be the next country to adopt bitcoin. LordFusitua, a member of the House of Lords, said he and the jackmallers want to use the country’s $750 million in reserves to buy bitcoin, representing 37 percent of its GPD.

Regulatory Discussions
Residents of El Salvador are divided on Bitcoin becoming legal tender, with some excited about it and others fearing it could be nothing more than a tool for official corruption and tyranny.

In addition, El Salvador’s historic acceptance of bitcoin has sparked a major debate in other countries and regions over related policy regulation. The New Indian Express says this has led the Indian government to consider bitcoin as an asset class in the country. A new bill on crypto regulation could be tabled in Parliament during the monsoon session, sources said.

Benoit Coeure, head of the BIS Innovation Hub: The adoption of bitcoin as legal tender in El Salvador is an interesting experiment, and we believe that bitcoin is a speculative asset that should be regulated.

Christine Lagarde, president of the European Central Bank (ECB), also shared her thoughts on El Salvador making bitcoin legal tender. She said, “The central bank’s policy on Bitcoin and other cryptocurrencies has not changed, and this certainly does not change our approach to crypto assets and regulation, supervision and proper classification, and they should be subject to avoidance of misinformation and misleading statements.”

In addition, the U.S. Senate Economic Policy Subcommittee may hold further hearings on cryptocurrencies. At the meeting, Senator Cynthia Lummis compared El Salvador’s recent bill to adopt cryptocurrencies as legal tender to the possible approach in the United States.

There are macroeconomic, financial and legal issues
The International Monetary Fund (IMF) said that El Salvador’s adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues. Crypto assets can pose significant risks, and effective regulatory measures are important when dealing with them.
“We view the bitcoin headlines in El Salvador as noise that could complicate discussions with the IMF,” Citi said in a recent report to clients, further reducing the bank’s already reduced exposure to the country.

“Cryptocurrencies are a very fringe story for Salvadoran investment theory,” said Patrick Esteruelas, head of research at Emso Asset Management in New York.

Wang Yongli, chief economist at Shenzhen Neptune Group, pointed out in an interview that some countries lacking sovereign currencies lack the most basic knowledge of currency, and that using fully decentralized digital crypto assets such as Bitcoin as legal tender will surely seriously disrupt economic and social operations due to its own price ups and downs, and the state will only be asking for death without any means of regulation.

JPMorgan Chase & Co. has also thrown cold water on El Salvador’s major decision to make bitcoin an official currency. In a recent report, JPMorgan wrote that it would be “difficult” to see any “tangible economic benefits” from adopting bitcoin. JPMorgan added that El Salvador’s decision to adopt bitcoin as its second form of legal tender could jeopardize its negotiations with the International Monetary Fund (IMF). Worse, JPMorgan claims that this event could affect the way larger economies treat bitcoin.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-look-at-the-btc-initiative-in-el-salvador-a-great-discussion-of-macroeconomic-financial-and-legal-issues/
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