El Salvador’s financial rating has deteriorated and the country has lost the confidence of the IMF. The adoption of bitcoin as legal tender is not going as planned for the South American state.
Bitcoin became an official currency in El Salvador in September 2021, and this decision could damage the country’s finance and economy.
Bitcoin convinces neither the IMF nor the rating agencies
Bitcoin’s value has tumbled in recent days, dropping more than 50% lower than its all-time high. El Salvador, which bought 25 million dollars worth of bitcoin (which is worth much less today) and already in a precarious situation, could pay serious consequences.
The International Monetary Fund has offered the country led by Nayib Bukele to help it repay its debts, but under certain conditions. One of them is to abandon bitcoin as the country’s official currency. The President’s refusal greatly complicates negotiations with the IMF.
Financial rating agencies are also concerned about the status and adoption of bitcoin. Cryptocurrency is deemed too volatile by these major market players, and rightly so given the current environment. Fitch Ratings and Moody’s have decided to downgrade El Salvador’s rating to a very poor CCC, which prevents it from borrowing and going into debt again in an attempt to rebound. As a result, El Salvador’s probabilities of default are increasing.
The expression “Bitcoin City” regularly bursts onto the media scene. A good dozen cities in the world want to claim the title of “Bitcoin city”, while several small countries have made bitcoin an official currency and “crypto-paradise” projects are multiplying.
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Source : El País
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