The official BTC adoption of El Salvador to utilize it as a legal tender during the early phase of September 2021 has been venerated as well as criticized, both inside the country and outside it across the world. Although a significant number of people consider it to have created a history, yet others are of the view that the country is progressing towards its approaching doom. One among the second is S&P “Standard-and-Pool Global.” As per the organization, the step has cruelly damaged the credit rating of El Salvador.
The direct negative implications pointed out by the company include that the country will not be able to acquire any support program from IMF (International-Monetary-Fund). Reuters reported that the programs would contain a loan agreement of up to $1 billion. Other than that, there is another risk of fiscal vulnerabilities as well as a knockback to the lending industry of the country. In this case, the banks would specifically face a mismatch of currency while issuing loans to their consumers. S&P argued about the matter by saying that the risks related to BTC adoption appear to thwart the potential advantages thereof in the matter of El Salvador. Rather, some straight negative impacts are to be noticed by this step.
The credit rating of the country has been lowered throughout the agencies since the time of the announcement. Although the present rating of S&P in the country is B- suggesting that it is stable, there might be some abrupt changes taking place continuously in the monetary policy of the country, causing a threat. At the time of the announcement, several months ago, there has been done severe scrutiny over the country on behalf of IMF and World Bank. In an indirect warning, IMF has formerly categorized the step of El Salvador as a move “too far.” It indicated dire outcomes of the move regarding the monetary and fiscal policies of the country.
Inside the country also, a lot of protests are being done to oppose the official adoption of BTC tender. It has been suggested by the recent reports that further violence has been witnessed in these protests as the destruction of the freshly installed Chivo machines. Furthermore, the present chaos of currency has also resulted because the population of the country, despite being small in number, knows about the volatility of BTC against the USD.