Central American Bank for Economic Integration provides cryptocurrency technical assistance to El Salvador amid internal and external troubles

According to Reuters, the head of the Central American Bank for Economic Integration (Banco Centroamericano de Integración Económica "BCIE") said the organization will "provide technical assistance" to El Salvador as the country plans to pass a bill to make Bitcoin a legal tender in early June this year.

BCIE will work with El Salvador's Ministry of Finance and Central Bank to "create a technical team to build the infrastructure," said Dante Mossi, head of BCIE.

Speaking at a virtual conference, Mossi warned that "in the anonymous world of cryptocurrencies, there can be bad players," which means that adopting a regulatory framework that "allows governments to control the use of cryptocurrencies" is of utmost importance. The head also denied the possibility of BCIE adopting Bitcoin, saying that the bank's finances will continue to be settled in US dollars.

But he was generally optimistic about El Salvador’s Bitcoin plans, claiming that the BCIE will fully support “this innovative policy of adopting Bitcoin as legal tender in El Salvador.” He added that the new technical team was established at El Salvador’s request and that the bank is now “preparing a technical assistance package to ensure that all needs are covered in the team.”

But there are still differences of opinion on the adoption of Bitcoin as legal tender both domestically and internationally.

According to ElSalvador.com (El Salvador Daily), "the adoption of Bitcoin as a parallel currency to the dollar, without a coherent economic framework, poses risks to the stability of the financial system and the national monetary system. There is also no reasonable channel to consult the International Monetary Fund in negotiating economic and fiscal measures related to the financing plan."

The media also quoted Manuel Enrique Hinds, former El Salvador Finance Minister, as warning that "this move could cause a very serious crisis in the country because we have always used US dollars to pay for everything. Now we even have risks in sending money with Bitcoin. Price fluctuations can change dramatically in a few hours, and although the government says it will guarantee price stability through a special fund, a mere $150 million fund is simply not going to do that."

Furthermore, the Salvadoran College of Professional Economic Sciences (COLPROCE), a group of economics experts, has asked the country's Congress to "repeal" the recently approved law. In a public appeal, the group asked lawmakers to create a space for discussion with "all social and economic actors."

"The conversion of Bitcoin from a cryptocurrency status to legal tender was approved without any studies being conducted to verify its feasibility and suitability for the Salvadoran economy. Most experts in monetary and financial economics, both domestic and foreign, agree that the adoption of Bitcoin puts economic stability at risk. Bitcoin could create a financial bubble and turn El Salvador into a tax haven."

In an opinion piece for La Prensa Gráfica newspaper, columnist Carlos Alfaro Rivas said the president had effectively told the world: “Welcome to the world of Bitcoin!” and impressed the cryptocurrency community with his English skills and “cool” image.

But he added that Salvadorans can only hope that Bukele's efforts to attract investors to the country do not inadvertently attract criminals. In addition, he cited the positive experience of the small village of El Zonte, where the Bitcoin economy is up and running. "I am not worried that we Salvadorans will not understand Bitcoin. In El Zonte, we have tamed it."

But he concluded that the country was now at a crossroads where it could do whatever it wanted.

Meanwhile, the rift between Bukele and the United States appears to be widening over El Salvador’s de-dollarization dream.

Samantha Power, administrator of the U.S. Agency for International Development (USAID), spoke about the "fragility of democracy" at an event at the Central American University in El Salvador, which is run by Bukele's radical opposition.

“The United States believes that governments must earn the trust and goodwill of their people. If corruption is allowed to flourish, if judicial independence is not respected, and if anticorruption institutions are dismantled — as we have seen all too often in Honduras, Guatemala, and El Salvador — then local governments ultimately become obstacles to the well-being of their own people.”

According to ElSalvador.com, Power also warned that corruption allegations could also hurt a country like El Salvador’s chances of attracting foreign investors, which would go against the ultimate purpose of Bukele’s Bitcoin bill.