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El Salvador bitcoin experiment comes with risks

Monday, July 12, 2021

Significance

The government hopes to encourage the cryptocurrency’s use for domestic and international transactions, with the aim of boosting financial inclusion. However, it has been criticised because there are low levels of access to digital finance among the population, and sceptics dismiss it as a gimmick. Further criticism centres on concerns around financial crime.

Impacts

  • Businesses accepting bitcoin will need to upgrade their IT infrastructure and security, imposing transition costs.
  • State investment in ICT infrastructure will also be required to enable broad uptake of digital finance options.
  • The government is set to launch new sovereign bonds, which it hopes will supplement IMF funding.

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