Top senators take aim at El Salvador bitcoin adoption over national security risks
Zachary Halaschak
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Two senators have introduced legislation that they hope will be a safeguard against any risks that El Salvador’s adoption of bitcoin as legal tender may pose.
Sens. Bob Menendez (D-NJ) and Jim Risch (R-ID) — the chairman and ranking member of the Foreign Relations Committee, respectively — announced the legislation, called the Accountability for Cryptocurrency in El Salvador Act, on Friday. The legislation was previously introduced and passed out of committee last year.
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The legislation specifically mandates that the State Department produce a report spelling out the risks for cybersecurity, economic stability, and democratic governance in El Salvador that its adoption of the flagship cryptocurrency poses.
“Using cryptocurrency as legal tender could weaken economic and financial stability and empower malign actors,” said Risch. “Given U.S. interest on prosperity and transparency in Central America, we must seek greater clarity on how the adoption of Bitcoin as legal tender may impact El Salvador’s financial and economic stability, as well as El Salvador’s capacity to effectively combat money laundering and illicit finances.”
Salvadoran President Nayib Bukele, a young technocrat, announced that his country would make bitcoin a legal tender in 2021, becoming the first country to make such a move.
The historic decision excited cryptocurrency evangelists, but bitcoin subsequently plunged in price.
El Salvador introduced federal digital wallets called Chivo, with the president envisioning Salvadorans using Chivo to pay for an array of products and services. The government has invested millions of dollars in bitcoin ATMs throughout the country.
When the legislation seeking to analyze the risks of El Salvador’s adoption of bitcoin was previously introduced, Bukele himself railed against U.S. lawmakers.
“Never in my wildest dreams would I have thought that the US Government would be afraid of what we are doing here,” the president, a prolific social media user, posted on Twitter back in March of last year.
“The US Government DOES NOT stand for freedom and that is a proven fact. So we will stand for freedom. Game on!” Bukele said, adding that bitcoin is “FU money.”
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Bitcoin, ethereum, and other cryptocurrencies have seen some positive growth since the start of the new year, with investors hoping to leave a dismal 2022, which was marked by enormous price declines and the implosion of crypto giant FTX, behind them.
On New Year’s Day, bitcoin was trading at about $16,500 and was generally below $17,000 for the stretch of time since FTX’s dramatic implosion in mid-November. But as of Friday, the flagship digital asset was trading at about $26,300 — a gain of about 60%. Ethereum has also increased by a large amount during that same period.