ECLAC secretary concerned about the ‘risks’ of Bitcoin

In a report from local news agency Diario El Mundo on July 9, the Economic Commission for Latin America and the Caribbean (ECLAC) raised their concerns about El Salvador’s decision to accept Bitcoin (BTC) as legal tender. ECLAC executive secretary Alicia Bárcena warned that this move poses several risks along with issues related to money laundering.

Bárcena highlighted how no study was conducted to look into the potential risks or benefits of using BTC as legal tender in El Salvador. Further commenting that El Salvador will most likely face scrutiny from the Financial Action Task Force (FATF), an authority that looks through money laundering issues around the world.

In the same report, she also addressed how some unnamed analysts found that BTC does not fulfil the basic functions of money and is in an extremely volatile market that could potentially pose ‘multiple systemic risks’ in El Salvador’s dollarized economy. 

Like ECLAC, other global organisations have also expressed their concerns about the adoption of BTC as legal tender since the ‘historical announcement’ of Salvadoran President Nayib Bukele last June 9 during the Bitcoin 2021 conference.

Through a video broadcast presented at the conference, Bukele mentioned that El Salvador will be the first country to use BTC as a legal form of payment. He also mentioned their partnership with digital wallet company Strike and their plan to build a modern financial institution using Bitcoin technology.

El Salvador’s big move to use BTC was met with a lot of backlash from different institutions and regulating bodies. In a press briefing last June 10, International Monetary Fund (IMF) spokesperson Gerry Rice talked about how they plan to discuss the situation in El Salvador, especially about Bitcoin with President Bukele. He pointed out that BTC as a legal tender raises several ‘macroeconomic, financial and legal issues that require very careful analysis’.

Aside from the IMF, the Bank of Russia deputy governor Alexey Zabotkin also voiced his concerns about El Salvador’s decision in a report by Russian-based news agency Tass last July 9. He argued that other countries are unlikely to follow suit because of the potential risks it has to the world’s financial system.

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