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S&P Global said this week that El Salvador adopting Bitcoin as legal tender has immediate negative implications on its credit rating. According to S&P, the main risk of this adoption is that the central American country could have trouble securing a support program with the International Monetary Fund (IMF). Furthermore, it could threaten to increase the country’s fiscal vulnerabilities and hurt banks by creating currency mismatches when giving out loans.
“The risks associated with the adoption of bitcoin as legal tender in El Salvador seem to outweigh its potential benefits.” “There are immediate negative implications for (the) credit.”
S&P is currently rating El Salvador at B- with a ‘stable’ outlook. Meanwhile, Moody’s cut the rating to Caa1, one step below B-, at the end of July while keeping it on a downgrade warning. El Salvador bond spreads to US Treasuries went on to hit a record high this week, surpassing the previous height hit in May 2020, on the growing investor concerns that the country will not reach a $1 billion loan agreement with the IMF. https://twitter.com/tier10k/status/1438590843439484930 Amidst this, El Salvador’s Court of Accounts is investigating a complaint about the government’s bitcoin purchases and the deconstruction of kiosks for crypto ATMs. The legal analysis report for the same will be sent to the General Audit Coordination, reported Reuters. The Court of Accounts, which oversees the country’s public resources, said it received a complaint late last week from a regional human rights and transparency organization about bitcoin implementation in El Salvador. Cristosal, the organization, made the complaint against six members of the Board of Directors of the Bitcóin Trust. It has requested an audit of the authorization process for the Bitcoin purchase and to review the construction of the booths used for the ATMs. As the Court of Accounts proceeds to carry out the investigation, Salvadorans have protested against President Nayib Bukele and accused him of a power grab. The protesters complained about the firing of the Supreme Court judges in May and the then-attorney general. They also continue to complain about the law making bitcoin legal tender alongside the US dollar. Anti-government marchers carried signs that said “no to dictatorship” and “we were defrauded by Bitcoin.” The protesters vandalized an ATM that enabled the exchange of BTC for USD. A recent poll by La Prensa Grafica newspaper showed that 85.7% of the 1,506 people polled across the country in the second half of August approved the president.