Fitch Ratings warns that Bitcoin could increase financial risks in El Salvador
One of the three major rating agencies, Fitch Ratings, warns that the Bitcoin expansion in El Salvador could bring many financial and operational risks to banks, as we read most frequently on the Bitcoin news today.
Fitch says that as legal tender, bitcoin can add and increase regulatory, financial, and operational risk. Fitch ratings warn that El Salvador’s decision to legally bid for BTC puts banks at risk of money laundering, tax evasion and terrorist financing. Chairman Nayib Bukele announced a week ago that BTC would become legal tender, but the World Bank, IMF and other agencies have criticized the move. The World Bank has rejected a new application by El Salvador to help the country introduce BTC as legal tender.
In a blog post, Fitch warned that BTC could violate international anti-money laundering and terrorist financing standards and could lead to tax evasion. The link between organized crime and BTC is of great concern to regulators as Bukele has denied ties to MS-13 and Barrio 18, the two largest drug trafficking gangs in China. However, critics say he worked with gangs to support his political career. One of the plan’s government partners is Chicago-based Zap Solutions, whose strike wallet is already in use in El Salvador.
We reported that Zap was not licensed to operate in the US, which resulted in Salvadoran emigrants transferring cash and cryptocurrencies from unlicensed states to El Salvador by using the available strike. Fitch has said that El Salvador has yet to publish regulatory guidance on cryptocurrencies and that there is a timeframe within which a regulatory framework and payment system will be put in place. Bukele even unveiled a new government-sponsored wallet, Chivo, saying that anyone who signs up will get $ 30 in BTC for free.
If El Salvador fails to comply with FATF standards, domestic banks can conduct more detailed due diligence and auditing of financial institutions. The rush through the BTC payment system will impact currency and risk security, as well as ransomware attacks. Critics argue that the new law will force people to accept cryptocurrencies and, given the concerns, Bukele said the use of BTC will not be mandatory.
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