El Salvador’s Bitcoin Adoption May Pose Risks to US Financial System: Senators

U.S. senators today introduced legislation requiring the State Department to write a report on El Salvador's Bitcoin Law and develop a plan to "mitigate potential risks to the U.S. financial system."

The proposed law, the Accountability for Cryptocurrency in El Salvador (ACES) Act, was today introduced by Jim Risch (R-Idaho), Bob Menendez (D-N.J.), ranking member and chairman of the Senate Foreign Relations Committee, and Bill Cassidy (R-La.).

In a press release, the senators say El Salvador's Bitcoin Law "raises significant concerns" and their proposed legislation gives the State Department 60 days to produce a report on the Central American country's adoption of Bitcoin, should the bill pass. 

Bitcoin, the biggest cryptocurrency by market cap, is legal tender in El Salvador, a tiny, impoverished country in Central America. The nation's eccentric, millennial president, Nayib Bukele, proposed the law last year, and it was passed in September.

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El Salvador is positioning itself to be the Bitcoin capital of the world. At the weekend, the country’s eccentric president, Nayib Bukele, announced plans to build a “Bitcoin City”—a tax-free paradise for Bitcoin bros the world over, powered by a volcano and funded by Bitcoin-backed bonds.  Though just how easy is it to spend the biggest and most famous digital asset in the tiny Central American country? Decrypt went to find out.  First, some background: In El Salvador, which has a population of...

The law requires businesses to accept BitcoinBitcoin as payment if they have the technological means to do so. The government even has a walletwallet for citizens to use called Chivo, and gave its citizens free $30-worth of the cryptocurrency to get started with. 

"El Salvador's adoption of Bitcoin as legal tender raises significant concerns about the economic stability and financial integrity of a vulnerable U.S. trading partner in Central America," said Risch in a statement published Wednesday. "This new policy has the potential to weaken U.S. sanctions policy, empowering malign actors like China and organized criminal organizations," he said.

"Our bipartisan legislation seeks greater clarity on El Salvador's policy and requires the administration to mitigate potential risk to the U.S. financial system," said Risch.

President Bukele responded on Twitter by calling the lawmakers "boomers." "We are not your colony, your back yard or your front yard," he wrote. "Stay out of our internal affairs. Don't try to control something you can't control."

The Bitcoin Law has been criticized by the World Bank, the IMF, and even JP Morgan. The IMF last month once again asked El Salvador to drop the Bitcoin Law. 

Citizens in the country have protested against the law—and what they perceive to be an increasingly authoritarian government—several times (but according to polls, the president is still largely popular among residents).

President Nayib Bukele regularly tweets when he buys Bitcoin—and has claimed that he does it on his phone, naked. 

Decrypt went to El Salvador in November where it found major merchants like McDonald’s and Starbucks accepting the cryptocurrency, but many ordinary citizens still confused by it.