El Salvador's rating could be negatively affected, says S&P Global

Posted on

El Salvador has made bitcoin its official legal currency, but the Central American country may face some short-term difficulties. Rating agency Standard and Poor’s (S&P) Global said the adoption of Bitcoin in El Salvador has affected the country’s credit rating in the short term. The adoption of Bitcoin in El Salvador became official on September 7, and the main cryptocurrency is now recognized as legal tender in the country. In a report published yesterday by Reuters, S&P Global said that the adoption of Bitcoin exposes El Salvador’s economy to enormous financial risks and poses certain challenges to the credit sector in the country. The rating agency added that the decision seriously affected El Salvador’s chances of securing a billion dollar loan deal from the International Monetary Fund (IMF). S&P Global added that the risks of El Salvador’s adoption of Bitcoin appear to outweigh the benefits, pointing to the law’s immediate negative implication. These warnings are similar to what Fitch Ratings, another popular credit rating agency, said last month. Last month, Fitch Ratings said: “El Salvador’s recent legislation establishing Bitcoin as legal tender will likely be a negative credit for local insurance companies exposed to the newly established currency due to higher currency risk and revenue volatility, as well as additional regulatory and operational risk considerations. Despite warnings from some financial entities, Salvadoran President Nayib Bukele remains optimistic about the benefits Bitcoin adoption will bring to the economy from his country. The government recently proposed to exempt foreign Bitcoin investors from paying taxes, a move that is expected to attract thousands of Bitcoin enthusiasts to the country. Fitch Ratings and S&P Global both gave El Salvador a B- rating, indicating that the country is high risk with a negative outlook. If El Salvador remains for the moment the only country to give Bitcoin legal tender, some countries now see the crypto-currency in a good light. Ukraine recently recognized the Bitcoin and other cryptocurrencies as an asset class, while the parliament of Panama and some South American countries also want to legalize cryptocurrency transactions. The post El Salvador’s Rating May Be Affected Negatively, Says S&P Global appeared first on Buy Bitcoin.


Advertisement Below