UN Commission Warns El Salvador on Risks After BTC Adoption

On Friday, The Economic Commission for Latin America and the Caribbean (ECLAC), a UN regional commission, raised concerns about El Salvador’s decision upon making Bitcoin (BTC) a legal tender.

According to a local news agency Diaro El Mundo, ECLAC Executive Secretary Alicia Bárcena pointed out that they are waiting for El Salvador to implement it. However, the executive secretary warned them by saying,

“(The new El Salvador BTC regulations causes) many macroeconomic, financial and legal challenges, that the truth requires a much more careful analysis.”

Bárcena thinks El Salvador is likely to face scrutiny from the Financial Action Task Force (FATF) regarding their decision. Apart from this, the official added that Bitcoin does not fulfill some basic functions of money and is very volatile. Hence, it poses multiple systemic problems in a dollarized economy.

Clearly, the list of global authorities concerned with El Salvador has been growing. Previously, the International Monetary Fund (IMF) warned El Salvador that making BTC a legal tender could pose legal and financial concerns.

Furthermore, the World Bank refused the request of El Salvador to help the country in transitioning to BTC adoption. On June 17, the World Bank cited issues related to Bitcoin’s alleged environmental impact and transparency.

Recently, Bank of Russia’s deputy governor Alexey Zabotkin also shared his concerns over El Salvador’s move. The governor argues that large economies are unlikely to follow El Salvador since it poses risks to financial stability.