Crypto setback? World Bank refuses a formal request from El Salvador to assist with implementation of Bitcoin as legal tender
The World Bank has reportedly rejected a request from El Salvador to help with the implementation of Bitcoin as legal tender.
Last week El Salvador became the first country in the world to accept Bitcoin as legal tender, after that country’s legislator approved President Nayib Bukele’s proposal to embrace the cryptocurrency.
But Reuters has reported that the World Bank, which is the international lender to developing nations, has refused to help implement it as legal tender, due to concerns over transparency and the environmental impact of Bitcoin mining.
World Bank refusal
On Wednesday, El Salvador’s finance minister Alejandro Zelaya reportedly said the country had asked the World Bank for technical assistance in making the move become a reality.
“While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings,” a spokesperson at the World Bank told Reuters.
In an effort to address environmental concerns, El Salvador’s president Nayib Bukele last week instructed a state-owned geothermal electric company to make plans to use clean energy from the country’s volcanoes for mining bitcoin, and promised measures for “immediate permanent residence” for crypto entrepreneurs who may not have to pay property or capital gains tax.
It should be remembered that Bitcoin mining uses large amounts of energy, much of it derived from the burning of fossil fuel.
Essentially this is because Bitcoin is created when high-powered computers compete against other machines to solve complex mathematical puzzles, a process known as mining.
This is mostly done in China (although the country is seeking to remove miners), and is an an energy-sapping activity that currently often relies on electricity generated with fossil fuels, particularly coal.
At current rates, Bitcoin mining uses about the same amount of energy annually as the Netherlands did in 2019, data from the University of Cambridge and the International Energy Agency has reportedly shown.
But the cryptocurrency is also viewed with concern by senior officials in developed nations.
Last month for example the governor of the Bank of England (BoE), Andrew Bailey, said cryptocurrencies “have no intrinsic value” and people should only buy cryptocurrencies if they are prepared to lose all their money.
BoE governor Bailey then one step further and said cryptocurrencies and similar assets were a danger to the public.
“Crypto-assets,” as the central bank’s official labels bitcoin and the rest, present a danger to the public, Bailey told the British Parliament’s Treasury Committee.
It should be remembered that the Bank of England in September 2014 had warned that Bitcoin could pose a threat to financial stability in the UK should it see widespread adoption.