El Salvador’s small bitcoin transfers soared four-fold the past month compared to last year, however, the spread of the country’s bonds widened as concerns over the newly introduced law grow. Transfers of bitcoin from the United States to El Salvador still represent a small amount compared to remittances sent in US dollars. The World Bank’s most recent report showed that in the first three months of 2021, remittances to El Salvador increased a third YoY, of which 95% come from the United States. El Salvador pushed a law that allowed for the use of bitcoin as it offers a quick and cheap remittance channel.
Yet there is still uncertainty due to its complexity and lack of infrastructure. Major remittance firms have expressed concerns about operating with cryptocurrency. Rating agency Moody’s stated on Friday that El Salvador’s bitcoin law may impact its ability to striking a deal with the International Monetary Fund on a funding programme. El Salvador’s move “carries risks for the financial system, the stability of the country’s monetary regime and signals a lack of a coherent economic framework,” said Moody. The IMF expressed economic and legal concerns over El Salvador’s novel bitcoin law, widening spreads on the bonds of El Salvador.
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