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El Salvador regulator probes government Bitcoin purchases

El Salvador regulator probes government Bitcoin purchases

Last updated 5th Aug 2022

El Salvador’s Court of Accounts has launched an investigation into complaints about the government’s Bitcoin purchases as well as about building cryptocurrency ATMs booths, Reuters reports. This month, El Salvador became the first country in the world to start accepting the flagship crypto as legal tender after a decision of the country’s young trendsetter president, Nayib Bukele.

Complaints are from a regional human rights organization

On September 10, the Court of Accounts received a complaint from Cristosal, a regional transparency and human rights organization, related to the introduction of Bitcoin in El Salvador. The organization requested an audit of the Bitcoin purchase authorization processes. Cristosal named specific names in its complaint – six members of the Board of Directors of the Bitcóin Trust, who represent the Finance and Economy ministries, as well as another public body, the secretariat of Commerce and Investments.

The Court went on record saying:

“Having admitted the complaint, it will be proceeded to carry out the legal analysis report and, in a timely manner, forward such report to the General Audit Coordination.”

The Court may sanction officials and ask the Attorney General’s Office to initiate criminal proceedings if its investigation yields irregularities. So far, the government of El Salvador has not responded to request for comment.

Glitch-plagued digital wallet under fire

Chivo, the digital wallet linked to the newly-built cryptocurrency cash ATMs letting users withdraw physical money from their Bitcoin accounts, was also attacked by Cristosal. The organization requested a review of the construction of the ATM booths connected to the digital wallet, which was financed with public funds.

El Salvador receives negative rating from S&P

On Thursday, S&P Global Ratings commented the Latin American country would “face immediate negative implications to its credit rating.” Investors such as sovereign wealth funds and pension funds use credit ratings as a measure of creditworthiness. As a result, ratings have a pronounced effect on borrowing costs. El Salvador’s move has hurt its chances at securing an IMF support program and exacerbates fiscal susceptibilities, as currency mismatches have a detrimental effect on loan allocation. S&P stated:

“The risks associated with the adoption of bitcoin as legal tender in El Salvador seem to outweigh its potential benefits.”

At the moment, the country’s rating with S&P is B- with a stable outlook. Fitch gave it a B- rating with a negative outlook. The worst rating has come from Moody’s: Caa1 with a negative outlook, which is right below B-.

Daniela Kirova

Daniela Kirova

Daniela is a writer at Bankless Times, covering the latest news on the cryptocurrency market and blockchain industry. She has over 15 years of experience as a writer, having ghostwritten for several online publications in the financial sector.