Bank of England Governor Andrew Bailey has expressed concerns about El Salvador making bitcoin its legal tender, considering the risk related to the cryptocurrency. This comes just days after President Nayib Bukele announced plans to build a “Bitcoin City” powered by the Conchagua volcano and funded by Bitcoin bonds.
Speaking at the Cambridge University student union on Thursday, Bailey indicated that El Salvador’s Bitcoin bet was unnerving because citizens will be forced to endure the cryptocurrency’s wild volatility.
Volatility is nothing new for the crypto markets. To put it into context, Bitcoin was valued at roughly $50,900 on the day El Salvador officially made bitcoin its legal tender. The pioneer cryptocurrency went on to top $69,000 earlier this month before sinking to $54,321.70 at the time of publication.
“It concerns me that a country would choose it [Bitcoin] as its national currency,” the BoE chief stated, according to a Bloomberg report.
Bailey further questioned whether the El Salvador residents really understand the nature and volatility of bitcoin, which is the root of his main concern.
Governor Bailey’s warnings against El Salvador’s first-of-its-kind adoption of Bitcoin are only the latest in a long series from international financial organizations and individuals — despite President Bukele’s position that the move will foster financial inclusion. The World Bank in June denied El Salvador’s request to help with the implementation of Bitcoin as legal tender on account of environmental and transparency concerns. Controversy notwithstanding, the country adopted Bitcoin on September 7.
During the same month, the International Monetary Fund (IMF) also argued that the adoption of bitcoin as legal tender “raises a number of macroeconomic, financial, and legal issues”. The financial institution doubled down on its concerns two months later, describing the South American Nation’s Bitcoin adoption as an “inadvisable shortcut” that carries “substantial risks”.
Many Salvadorans are also wary of Bitcoin’s new status as an official currency alongside the US dollar. They seemingly understand the cryptocurrency’s notorious volatility, and this has resulted in thousands taking to the streets to protest against the Bitcoin Law.
What’s more, Ethereum co-founder Vitalik Buterin also doesn’t think El Salvador’s millennial president is a mastermind. He called the Bitcoin policy “reckless” last month in a scathing post on Reddit regarding the topic.
El Salvador nonetheless, has been accumulating the flagship cryptocurrency in recent weeks. President Bukele revealed today the government bought 100 more bitcoins during a global market sell-off caused by fears of a new COVID-19 variant. The latest purchase brings the country’s total holdings to 1,220 BTC, worth approximately $66 million following the cryptocurrency’s retracement to the $54.3K region.
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