Bukele’s Bitcoin trade raises El Salvador’s sovereign credit risk: Moody’s

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The recognition standing bureau believes El Salvador’s Bitcoin experimentation has elevated the country’s hazard illustration and could bounds its entree to overseas indebtedness markets.

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El Salvador’s historical clasp of Bitcoin (BTC) could person antagonistic consequences connected the country’s sovereign recognition outlook, according to Moody’s Investors Service. 

Moody’s expert Jaime Reusche told Bloomberg this week that El Salvador’s Bitcoin gambit “certainly adds to the hazard portfolio” of a state that has struggled with liquidity issues successful the past.

Under the enactment of President Nayib Bukele, El Salvador has recognized Bitcoin arsenic ineligible tender and issued a state-run crypto wallet to facilitate payments, transfers and ownership. Along the way, El Salvador has amassed a treasure thorax of 1,391 BTC, with President Bukele famously “buying the dip” connected respective occasions by utilizing Bitcoin’s volatility to adhd to his country’s holdings.

— Nayib Bukele (@nayibbukele) September 7, 2021

However, Reusche warned that accumulating much BTC would elevate El Salvador’s hazard of default. “If it gets overmuch higher, past that represents an adjacent greater hazard to repayment capableness and the fiscal illustration of the issuer,” helium said.

PREDICTION: The El Salvador bitcoin enslaved volition beryllium ridiculously oversubscribed pic.twitter.com/2Kj0urm0SN

— Pomp (@APompliano) November 23, 2021

In summation to downgrading El Salvador’s recognition rating, Moody’s has warned that the country’s alleged Bitcoin volcano enslaved could bounds its entree to overseas enslaved markets. Proceeds of the volcano bond, which is expected to rise astir $1 billion, volition beryllium utilized to money El Salvador's Bitcoin City project. 

Related: Tonga to transcript El Salvador’s measure making Bitcoin ineligible tender, says erstwhile MP

Attacks connected El Salvador’s Bitcoin gambit by bequest fiscal institutions are thing new. In November 2021, the Washington-based International Monetary Fund warned El Salvador against utilizing Bitcoin arsenic ineligible tender. Meanwhile, the World Bank has rejected the country’s petition for assistance successful implementing its Bitcoin Law implicit alleged biology and transparency concerns.

Nevertheless, El Salvador has remained steadfast successful embracing Bitcoin and successful creating an charismatic situation for crypto investors and entrepreneurs. Last week, concern curate Alejandro Zelaya said the country’s Bitcoin Law has already attracted overseas investment.

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