El Salvador President Bukele is holding a 44-nation gathering today to discuss various issues, including Bitcoin.
On late Sunday night, El Salvador President Nayib Bukele announced on Twitter that 32 central banks and 12 financial authorities from 44 countries will meet on Monday, May 16, to discuss El Salvador’s Bitcoin rollout and its benefits in the country.
Tomorrow, 32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the #Bitcoin rollout and its benefits in our country.
— Nayib Bukele (@nayibbukele) May 16, 2022
The country of El Salvador adopted Bitcoin as legal tender in September last year and since then several benefits have been introduced. Authorities are keen on collecting further information to develop different strategies to include Bitcoin in their economy and plans for expansion.
According to the President’s official Twitter handle, the meeting is scheduled to occur on May 17, 2022. The list of countries attending the Bitcoin meeting includes several developing economies.
Central Bank of Eswatini
— Nayib Bukele (@nayibbukele) May 16, 2022
Ministry of Finance of Eswatini
Central Bank of Jordan
Central Bank of The Gambia
Comisión Nacional de Bancos y Seguros de Honduras
Direction Générale du Trésor, Ministère des Finances et du Budget, Madagascar
Maldives Monetary Authority
In follow up tweets, the president announced that the Central Bank of Sao Tome and Príncipe, Central Bank of Paraguay, National Bank of Angola, Bank of Ghana, Bank of Namibia, Bank of Uganda, Central Bank of the Republic of Guinea, Central Bank of Madagascar, Bank of the Republic of Haiti, and the Bank of the Republic of Burundi, Central Bank of Eswatini and its Ministry of Finance, Central Bank of Jordan, Central Bank of The Gambia, National Committee of Banks and Seguros of Honduras, Directorate General of Treasury, Ministry of Finance and Budget, Madagascar, and the Maldives Monetary Authority will be attending.
The president also added that the National Bank of Rwanda, Nepal Rastra Bank, Sacco Societies Regulatory Authority (SASRA), Kenya, State Bank of Pakistan, General Superintendence of Financial Entities of Costa Rica, Superintendence of the Popular and Solidarity Economy of Ecuador, and the Central Bank of El Salvador will also be in attendance.
How will El Salvador’s Bitcoin experiment turn out?
El Salvador’s president, Nayib Bukele is a well-known crypto enthusiast. While Bukele has a strong personal stake in cryptocurrency and the crypto scene, El Salvador has genuinely struggled with what currency it should use over the past twenty years. The country abandoned its currency, and thus control over the monetary policy, in the year 2001 in favor of the US dollar. Due to this, many Salvadorans rely on remittances from relatives abroad to make ends meet, and those payments have to pass through harsh predatory services to make it home.
Unfortunately, the Bitcoin adoption did not have a very positive impact on the country’s economy, and now that the crypto market is crashing, it is looking less likely that El Salvador will be able to surface through its national debt.
To put this in perspective, Bitfinex longs have never been anywhere near this high before.
— Miles J Creative (@JohalMiles) May 15, 2022
Or increased so quickly.$BTC pic.twitter.com/5eWajPZPU3
Moreover, Bukele even double down on crypto, having bought 500 Bitcoin (about $15.5 million at the time, now $14.1 million) on May 9 during the dip. On the same day, the president tweeted about plans for a “Bitcoin City” to be built in the shadow of a volcano, with pictures of him admiring its gold-painted scale model. El Salvador has been heavily affected by the recent market crash, as the country had bought a lot of Bitcoins.
Are there possibilities of red flags?
In January, the IMF (International Monetary Fund) had addressed El Salvador to remove Bitcoin as legal tender. The IMF had issued a press release warning of the risks associated with the use of Bitcoin on financial stability, financial integrity, consumer protection, and fiscal contingent liabilities.
Similarly, in February, Fitch Ratings downgraded El Salvador’s Long-Term Foreign-Currency Issuer Default Rating (IDR). According to Fitch ratings, El Salvador has been in discussions with the IMF for a $1.3 billion three-year program. Thus, the IMF called for El Salvador to remove Bitcoin as legal tender.
However, the prospects of a $1.3m loan remained low, while supporting the Fitch downgrade. The $1.3 billion is seen as a lifeline to meet the short-term debt totaling $1.3 billion in August-October 2022.
There may be concerns over this gathering. The risk of bitcoin positions or even bitcoin as legal tender, to the respective economies, would be very significant.
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Kevin Mudd, EU Regulated Fund Manager and KMG Capital Markets' CEO, created D-CORE to become the first provider of high-quality, institutional-level research in the crypto/blockchain market. He heads D-CORE's operations from Limassol, Cyprus.
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