US reps' Bill says El Salvador adopting Bitcoin is a careless gamble
Several promising reports on cryptocurrency have been produced by the House and Senate; nevertheless, one congresswoman appears to believe that there are more drawbacks than benefits to the adoption of Bitcoin in general.
Representative Norma J. Torres of California's 35th District and Congressman Rick Crawford introduced the Accountability for Cryptocurrency in El Salvador (ACES) Act on April 5 to offset the risks to the US from El Salvador's adoption of Bitcoin as legal tender.
Torres criticized the Central American country's adoption of Bitcoin as a "careless gamble" in a tweet.
“El Salvador’s adoption of Bitcoin is not a thoughtful embrace of innovation, but a careless gamble that is destabilizing the country. “
“El Salvador is an independent democracy and we respect its right to self-govern, but the United States must have a plan in place to protect our financial systems from the risks of this decision.”
What is the purpose of the Bill?
According to the bill, the State Department must analyze the risks to cybersecurity, economic stability, and democratic governance in El Salvador as a result of Bitcoin's acceptance as legal currency, and devise a strategy for minimizing those risks to the US financial system.
If the State Department analysis requested by the bill is sufficient, it may find that Bitcoin's transparency (all addresses and activities on Bitcoin's blockchain are completely public) makes it easier for US national security and law enforcement authorities to track and deter criminal activity.
Representative Crawford stated, “The rise in popularity of cryptocurrencies such as Bitcoin creates questions and a necessary review of regulation and consumer protection which the U.S. federal government should be involved in.”
It is widely recognized that El Salvador's decision to accept Bitcoin as legal tender entails considerable risks.
El Salvador's usage of Bitcoin earlier this year was described by the International Monetary Fund (IMF) as a danger to financial stability and consumer safety. As a result, the IMF decided not to lend to the country.
El Salvador may have lost as much as $22 million due to a drop in the Bitcoin market, according to Moody's Sovereign Risk Group.
As a result, the proposed law aims to ensure that El Salvador's activities do not jeopardize American national security.
ACES passed through a Senate committee in February and might be brought up for a full Senate vote. El Salvador's president, Nayib Bukele, denounced the bill as "US intervention in El Salvador" after it passed that hurdle.
He claimed that the US administration is "afraid" of El Salvador's adoption of bitcoin as a legal tender and advised the US to stay away from the country's affairs.
However, the US federal government's fears over Bukele's desire to adopt bitcoin are understandable.
Sen. Jim Risch (R-ID) said in Feb:
“This new policy has the potential to weaken U.S. sanctions policy, empowering malign actors like China and organized criminal organizations. Our bipartisan legislation seeks greater clarity on El Salvador’s policy and requires the administration to mitigate potential risk to the U.S. financial system.”
Sen. Bill Cassidy (R-LA) added:
“El Salvador recognizing Bitcoin as official currency opens the door for money laundering cartels and undermines U.S. interests. If the United States wishes to combat money laundering and preserve the role of the dollar as a reserve currency of the world, we must tackle this issue head on.”
While Congress has legitimate concerns, most US legislators appear to be way behind the times when it comes to Bitcoin and the cryptocurrency sector.
In contrast, it is Federal Reserve corporate banks that have a poor track record of permitting criminals and terrorists to launder money into their fortified corporate vaults in exchange for US dollars.
A number of well-publicized infractions of institutional finance have resulted in fines rather than technically viable policy adjustments that narrow the loopholes to terrorists and criminals.
To influence foreign powers, the US State Department and legislators will have to embrace a new model of incentive structures (carrots over sticks). The United States will continue to impose limits on government foreign aid and direct foreign investment from established US firms whose investment is prized in developing countries.
Should the Federal Reserve System fail to block Bitcoin, the United States should consider joining the hash power race in order to maintain its worldwide monetary power.
First published on Apr 5, 2022