The decision on bitcoin as a legal tender will take effect on September 7. The agency highlights that regulations must be adapted to the FATF guidelines.
A report by the rating agency Fitch Ratings, published last Friday, June 25, indicates that the law approved in El Salvador that converts bitcoin into legal tender implies risks for banks, including violations of the provisions against money laundering. money and even terrorist financing.
The Fitch Ratings report affirms that the legal instrument that will come into effect on September 7, would increase the regulatory, and operational risks of financial institutions, including the possibility of disrupting international regulations against money laundering and financing of terrorism.
Fitch is, along with Moody’s and Standard & Poors, among the most relevant credit rating agencies in the United States of America.
According to Fitch, the rating agency argues that the chances of using bitcoin in financial obligations, including bank loans, could experience a vast increase in bitcoin traffic through the nation, which may also increase the risks coming from illicit activities to harm the Salvadoran financial system.
Fitch noted that financial regulations must comply with global standards set by the Financial Action Task Force (FATF), which include recommending that cryptocurrency companies share information about their clients.
The agency states that the lack of transparency bitcoin has could increase the risk of money laundering. Regarding this last information, it is also vital to consider that all bitcoin transactions are public and that its accounting book is open and transparent.
The agency highlights that the ratings of the largest banks in El Salvador are based on the support provided by the corporate headquarters of these institutions. Fitch believes that foreign parent banks would bring operational and technical support to handle every risk associated with the implementation of bitcoin, as all operations happen at the headquarters level.
However, there is the impact of regulatory and reputational risks about Fitch’s assessment of the propensity to support corporate headquarters, especially once the scope of the new regulation comes to fruition.
On June 8, the Legislative Assembly of El Salvador approved the so-called Bitcoin Law, introduced by President Nayib Bukele. This law made El Salvador the first country to grant legal tender to bitcoin.
Also, on a broadcast that took place in the national chain last Thursday, the 24th, President Bukele announced the availability of the law in September, as well as a bitcoin wallet or purse, through mobile applications, for all Salvadorans to start gathering currencies in it. The bitcoin wallets will meet their proper delivery with an initial balance of USD 30 in BTC, and will also serve to receive funds and make payments in BTC and in dollars.
By: Jenson Nuñez
