Fitch Rating Agency: El Salvador’s Bitcoin Adoption Increases Banks’ Regulatory, Financial & Operational Risks
While El Salvador is all set to officially make Bitcoin a legal tender on Sept. 7 and preparing to airdrop $30 in BTC to its every adult citizen, rating agency Fitch says this step means banks face higher risks, including violating rules against money laundering and terrorism financing.
The bitcoin adoption “would increase financial institutions' regulatory, financial and operational risks, including the potential of violating international anti-money laundering and terrorist financing standards,” said Fitch in its report this week.
To pay his bills in El Salvador 🇸🇻, Milton Cabrera says he would have to "spend an hour on the bus, and another two hours waiting to make the payment" in line.
He paid them instantly, from his home, with #Bitcoin pic.twitter.com/qT9EczZdnB
— Documenting Bitcoin 📄 (@DocumentingBTC) June 24, 2021
According to Fitch, the possibility of using bitcoin for all obligations, including bank loans, could funnel bitcoin traffic through the Central American country. This may then increase the risks that proceeds from illicit activities pass through the country’s financial system.
Bitcoin’s lack of transparency, Fitch said, could further increase the increase of money laundering.
The rating agency added that regulations need to fully comply with the global standards set by the Financial Action Task Force (FATF).