World Bank Denies Assistance to El Salvador in Bitcoin Implementation

The World Bank will not be assisting El Salvador’s government in Bitcoin implementation. Earlier on Wednesday, the country’s finance minister had approached the organization, seeking technical help to adopt the flagship cryptocurrency as legal tender alongside the US dollar.

World Bank Rejects Assistance to El Salvador on Bitcoin

It appears El Salvador has several hurdles to overcome before it regularizes BTC payments and investments in the country. On Wednesday, the Central American country faced one of its many hurdles when the World Bank rejected assistance to its government in Bitcoin implementation. The Salvadoran Finance Minister, Alejandro Zelaya later confirmed that his country had in fact approached the bank.

The minister also addressed the country’s negotiations with the IMF, which look increasingly clouded since the passage of legislation on Bitcoin. Zelaya asserted that the talks with IMF had been a success, despite the institution expressing its reservations with the country’s move to BTC transactions. Previously, IMF spokesperson Gerry Rice had underlined that adopting Bitcoin as legal tender “raises several macroeconomic, financial and legal issues that require very careful analysis.”

El Salvador’s Bitcoin Legislation Might Have Damaged Investor Sentiment

The impending deal with IMF has also fuelled investor concerns about the country’s debt. A growing number of investors are demanding higher premiums to hold Salvadoran debt.

With regards to El Salvador’s outstanding challenges, Siobhan Morden, head of Latin America fixed-income strategy at Amherst Pierpont Securities noted, “There is no fast track for a solution on an IMF program and even uncertainty on whether the bitcoin proposal is compatible with diplomatic U.S. (or) multilateral relations.”

Earlier this month, the tropical country became the first in the world to adopt Bitcoin as legal tender. Its president Nayib Bukele touted the cryptocurrency’s potential to increase revenue from remittances. 

El Salvador’s leap towards Bitcoin has also coincided with Bukele’s exit from the anti-corruption accord with the Organization of American States, a disappointing development for the U.S. government that is looking to contain corruption in Central America as part of its policies on immigration.

According to Shamaila Khan, head of EM debt strategies at AllianceBernstein, the media is too focused on the Bitcoin hype, while it should be covering the deal with IMF. “It is important for El Salvador to get the IMF program done. If it was lost on them, they wouldn’t have the conversations,” she said.