El Salvador’s decision to make bitcoin legal tender is an “interesting experiment” with a speculative asset that does not pass validity of tender, a senior global central bank official said Friday.
The Central American country on Wednesday became the first country in the world to adopt bitcoin as its national currency, saying it would help Salvadorans living abroad send remittances home. read more
“El Salvador, this is a really interesting experiment,” said Benoit Coeur, head of the Bank for International Settlements (BIS) innovation center.
“At BIS, we have made it clear that we do not believe that Bitcoin has passed the test of being a means of payment. Bitcoin is a speculative asset and should be regulated that way, ”Ker said when launching the Center for Regulatory Research. at the Bank of England (BoE).
The comments echo those of the International Monetary Fund, which said Thursday it has economic and legal concerns about El Salvador’s move. read more
El Salvador replaced its national currency with the US dollar in 2001.
Rapid progress in electronic payments in the private sector and the reduction in the use of cash accelerated by COVID-19 have forced central banks to consider developing digital versions of their own legal tender, known as central bank digital currencies.
“We have to deal with cutting technology,” Ker said. “We have to work with the private sector.”
BIS is building a network of innovation hubs around the world to enable central banks to share information on new payment technologies and keep up with private sector initiatives such as Facebook’s Diem stablecoin.
Stablecoins are cryptocurrencies that have a stable value compared to traditional currencies or a commodity like gold to avoid the volatility that makes bitcoins and other digital tokens impractical for most commercial transactions.
Bank of England Governor Andrew Bailey said regulators are working closely on the potential impact of stablecoins on financial stability, as well as developing their own digital currencies.
“If this happens, it will be one of the most fundamental innovations in the history of the central bank. This will lead us into a new era, ”Bailey said.
Earlier this week, financial regulators from major economies proposed tough capital rules for banks that own cryptocurrencies, and Bailey said any stablecoin-based payment system must meet the same standards as banks. read more
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