The Economic Commission for Latin America and the Caribbean (ECLAC), a United Nations regional commission to promote economic cooperation, is the latest regulator to raise concerns about El Salvador’s decision to accept Bitcoin (BTC) as legal tender.
ECLAC Executive Secretary Alicia Bárcena has warned that El Salvador’s Bitcoin switch carries a number of systemic risks, as well as risks related to money laundering, local news agency Diario El Mundo reported on Friday.
Bárcena emphasized that there has not yet been a study that has examined the potential risks or benefits of El Salvador’s acceptance of BTC as legal tender. She expressed her confidence that El Salvador is likely to face scrutiny and risk by the Financial Action Task Force (FATF) regarding its decision to get into Bitcoin.
The official added that Bitcoin fails to perform some of the basic functions of money and is subject to extreme volatility that could present “multiple systemic risks” in a dollarized economy.
Connected: Survey found that most El Salvadorans are skeptical about using BTC as legal tender
With the warning, ECLAC joins a growing number of global agencies and organizations who are increasingly concerned about El Salvador’s decision to adopt BTC as legal tender after Salvadoran President Nayib Bukele announced historic laws in early June. The International Monetary Fund was one of the first regulators to subsequently raise awareness of the matter, warning that the adoption of Bitcoin as legal tender in the country could raise legal and financial concerns.
On June 17, the World Bank declined El Salvador’s request for help in the country’s transition to adopting Bitcoin, citing issues related to Bitcoin’s alleged environmental impact and transparency. Deputy Governor of the Bank of Russia Alexey Zabotkin also raised concerns about El Salvador’s Bitcoin change today, arguing that major economies are unlikely to heed the country’s call to legal tender BTC as it poses risks to the country Financial stability.