Tuesday, July 27, 2021

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    Bitcoin won’t help boost El Salvador’s economy, idb president says

    The president of the Inter-American Development Bank (IDB), Mauricio Claver-Carone, ruled out on Tuesday that the adoption of bitcoin as legal tender in El Salvador help boost the economy, as the government seeks to Nayib Bukele, and warned instead about its volatility.

    “What the government of El Salvador is looking for is how to facilitate transactions, how to facilitate trade, how to do it in a transparent and secure way. But bitcoin is not a solution,” he said. Claver-Carone at a press conference.

    “For a country like El Salvador, whose comparative advantage is monetary stability due to dollarization, normalizing bitcoin would add unnecessary volatility to the system,” he added.

    In particular, he highlighted the fluctuating price in recent weeks of bitcoin, whose price fell on Tuesday below $30,000 for the first time since the end of January, affected by the efforts of China for regulating this decentralized market.

    El Salvador has been using the U.S. dollar as its official currency for 20 years, but its parliament, controlled by Bukele, passed on June 9 a law that will allow bitcoin to be used for all transactions from September, becoming the first nation in the world to adopt this cryptocurrency.

    “The intentions of the Government of El Salvador are good, but I think we need to study the issue more deeply,” Claver-Carone said.

    Bukele, promoter of the adoption of bitcoin, maintains that it will contribute to the banking of the population and avoid losing “millions of dollars” in intermediation in the sending of remittances from Salvadorans from abroad, key to the economy of the Central American country.

    Claver-Carone noted that the IDB, through its innovation lab, has made international payments using blockchain technology, an encrypted and secure database used to send money or exchange currencies.

    “We have done this in the Caribbean, with innovative examples of digital transactions in the Bahamas, in Dominican Republic“, he said.

    But he stressed that bitcoin is “something else.” “It’s basically a speculative resource,” he said.

    Claver-Carone answered questions from reporters on the sidelines of Miami-LAC 2021, the first business forum organized by the IDB to promote trade and investment opportunities between South Florida and the Latin American and Caribbean (LAC) region.

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