by Viktor A 

June 11, 2021

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The government of El Salvador has officially recognized Bitcoin as a legal currency and launched its own digital currency exchange, Gabinete Digital, in an effort to improve foreign exchange trade and cash payments. The move has sparked fears of a potential backfire, however, as the country’s adoption of digital currency raises the potential for a spike in price volatility to undermine economic stability and jeopardize the nation’s IMF negotiations.

The Central American nation of El Salvador is one of the few countries to adopt Bitcoin as a legal currency. Officials say the value of a bitcoin is too low to trigger a tax, but the move could jeopardize the country’s ability to participate in IMF discussions in case the value rises. El Salvador’s Ministry of Finance has released a statement saying that the government is not interested in cryptocurrency, which is not a legal currency, and it will not be used in any negotiations.

The Bank of Central America (BoCA) has been entangled in a complex web of issues, both political and economic, since the beginning of the year. The BoCA is the oldest central bank in Central America, and is ranked as the second most important central bank in Latin America after the Banco Central de la Republica Argentina. At the moment, the BoCA is in the process of creating a digital currency.