News
26 Jun 2022

Does the World Bank Support Bitcoin?

Are you wondering whether the World Bank supports Bitcoin? If so, here's what this financial institution thinks about Bitcoin. 

The World Bank, an international money lending institution, has raised concerns about the Bitcoin industry's lack of complete transparency. While this electronic money has opened possibilities for businesses and trade, many people are wary about its future. Most countries and their central banks are worried about disrupting their economies if they allow Bitcoin to be a legal tender. The World Bank cited concerns over transparency and the environmental impact of Bitcoin mining.

The World Bank has also not been kind to El Salvador since the country adopted this electronic money as a legal tender claiming that it does not support the move due to environmental and transparency concerns. 

On the other hand, the World Bank may have to accept this virtual currency from countries that have embraced it. On the other hand, this digital money energy demands and its ease of use in money laundering, tax evasion, and other illegal schemes make Bitcoin a no go in the eyes of the World Bank.

Technical Challenges

The World Bank may be skeptical of El Salvador's bid to use Bitcoin for other reasons. The technical challenges are not insignificant whatsoever. For one, Bitcoin's price has been highly volatile compared to the dollar. Furthermore, merchants in El Salvador still price their goods in dollars, and the exchange rate depends on the time of purchase. That approach appears to be what the El Salvadoran government is taking, but it treats Bitcoin more as a token than an actual currency. 

Along with that, Bitcoin transactions can be notoriously slow because miners must verify each and only process blocks of transactions, not individual ones. Therefore, parties in a Bitcoin transaction must wait for miners to validate each blog to complete it. One block takes about 10 minutes for miners to add it to the blockchain. On the other hand, various projects are working to improve the transaction speed, but they are not part of Bitcoin proper yet.

Articles of Agreement

The World Bank's founding document outlines the procedures and principles by which the World Bank pledges to engage with sovereign governments. A central theme in the paper is its commitment to accept payments from member states in local currencies. Section 12 of Article V defines acceptable forms of holdings of currency as follows:

The World Bank shall accept from any member, in place of any part of the member's currency, paid into the Bank under Article II, section 7(i) or to meet amortization payments on loans made with such currency not needed by the bank in its operations.

So, as well as the charter allowing payments in the member's currency, the accord enables central banks to pay with notes or similar obligations backed by their reserves. These are effective IOUs from governments that dollars and precious metals can back. On the other hand, Bitcoin can support them. Perhaps in El Salvador's case, this could be the established 150m Bitcoin fund of the Banco de Desarrollo de El Salvador, the national development bank. 

The new law in El Salvador meant that every business must accept Bitcoin as a legal tender for goods and services unless it lacks the technology needed to process the transaction. El Salvador's economy relies heavily on remittances or money sent home from abroad, which makes up around 20% of the country's gross domestic product. The citizens can send, receive and trade Bitcoin via bitcode-prime.cloud

The Bottom Line

Overall, the World Bank is still working its way up to determine whether support this digital money. El Salvador led the way in showing that Bitcoin can work as a legal tender. However, some authorities and experts are skeptical about it.

 

(Sponsored Article)

No other news.

3 coins to keep an eye on 👀

Subscribe to receive a weekly selection of 3 coins to watch closely, based on upcoming events and technical analysis.