El Salvador Bitcoin Law Has ‘Immediate Negative Implications,’ Credit Rating Agency Says
S&P Global said that the risks of the country’s decision to make bitcoin legal tender outweighs its potential benefits.
Sep 16, 2021 at 11:09 p.m. UTCUpdated May 11, 2023 at 5:48 p.m. UTC
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Credit rating agency S&P Global said El Salvador’s decision to adopt bitcoin as legal tender had “immediate, negative implications,” according to a report by Reuters on Thursday.
- S&P said that bitcoin adoption could deter El Salvador from participating in an International Monetary Fund support program, increase financial weaknesses and impair banks by generating currency mismatches when they look to loan money, Reuters said.
- “The risks” of El Salvador’s bitcoin adoption “seem to outweigh its potential benefits,” S&P said, according to the report. “There are immediate negative implications for (the) credit.”
- The agency has given El Salvador a B- rating and a “stable” outlook.
- Bitcoin became legal tender in El Salvador on Sept. 7 to great fanfare, but it has spurred protests among critics who say the law is not constitutional. The law was passed by a supermajority in El Salvador’s legislature on June 9.
- In July, the ratings agency Moody’s downgraded El Salvador’s long-term, foreign-currency issuer and senior unsecured ratings from B3 to Caa1 and maintained a negative view of the country’s economy partly because of the government’s passage of the bitcoin law.
- In a Thursday tweet, Coinbase co-founder and CEO Brian Armstrong noted that “crypto does not account for the majority of transactions in El Salvador yet” but called the country’s bitcoin adoption “steps in the right direction.”
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UPDATE (Sept. 17, 03:59 UTC): Adds information about Brian Armstrong tweet.
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James Rubin was CoinDesk's U.S. news editor based on the West Coast.