The U.S. government may not be too happy with the way Nayib Bukele is running El Salvador, and it expects the Salvadoran president to take great care in the way his country adopts and uses Bitcoin now that it is legal tender.
Victoria Nuland, a long-time U.S. State Department official and the current Under Secretary of State for Political Affairs, recently met with President Bukele and urged his government to do whatever it can to regulate Bitcoin and avoid any potential illegal activity associated with the cryptocurrency.
"I did suggest to the president that whatever El Salvador chooses to do, you ensure that it is well regulated, that it is transparent and that it is responsible, and you protect yourself against malign actors," she said, according to statements reported by AFP.
El Salvador currently uses the U.S. dollar as legal tender after abandoning its native currency, the colon. Now with Bitcoin circulating on par with the dollar in El Salvador, the legal status of BTC introduces a potential twist in the global financial arena.
Unlike El Salvador, the United States has a more skeptical stance on Bitcoin and cryptocurrencies. U.S. authorities are concerned about various issues ranging from environmental impact, terrorist funding, market manipulation, and even the danger that cryptocurrencies could cause the U.S. to lose geopolitical leverage by weakening the influence of the dollar.
But several factors could push El Salvador in a very different direction from the United States. First, the danger of possible sanctions following its shift towards a more authoritarian government would allow Salvadorans to have a non-censorable way to receive their vital remittances.
Similarly, the legalization of Bitcoin as legal tender would give the country exposure to foreign capital willing to invest and develop industries in the country.
Bukele’s recent crypto move has generated mixed reactions. For example, the Central American Bank for Economic Integration is willing to support the country in this endeavor, but the IMF and the World Bank expressed their concerns and refused to provide assistance. Other entities such as JP Morgan and the BIS are also skeptical and have adopted a wait-and-see approach.