Moody believes Bitcoin adoption will downgrade the credit rating of El Salvador

A Moody analyst predicted that El Salvador is putting its credit profile at risk because of the accumulation of Bitcoin under huge volatility. 

On 7 September, El Salvador became the first country in the world to adopt Bitcoin as legal tender officially. However, the whole process to adopt Bitcoin was not easy. Many players/experts/haters/supporters raised their voices against the El Salvador president Nayib Bukele. 

In the latest, a negative point of view can be heard from Jaime Reusche, the analyst at Moody. According to Jaime, El Salvador is moving toward a high-risk profile, where it will have a negative credit rating. 

Jaime told Bloomberg that, in past, El Salvador faced huge volatility because of the Bitcoin holdings of El Salvador’s treasury funds. And this volatility is putting the country toward negative consequences on the country’s sovereign credit outlook. 

After the adoption of Bitcoin, El Salvador bought bitcoins from time to time in dip ( after the very crash), which seems a good idea. But Jaime claimed that it will result in more harm for the country. 

Jaime stated:

“If it gets much higher, then that represents an even greater risk to repayment capacity and the fiscal profile of the issuer.”

Besides the country credit rating downgrade, analysts claimed that the Bitcoin bond for the Bitcoin city initiative of El Salvador may also end up in big trouble for El Salvador because it may lead to the inaccessibility of foreign bond markets for the country.

This is not the first time El Salvador faced any kind of criticism for its Bitcoin-related initiatives before this Washington-based international monetary fund (IMF) raised issues against El Salvador to use Bitcoin as legal tender. Besides this, at the very beginning of the Bitcoin law plan of El Salvador, the World bank stated in advance that it will not help El Salvador to fight against problems to bring a legal framework to use Bitcoin as Currency, however, the Bank confirmed that it will support in the traditional financial system. 

Read also: 60% of US crypto holders are ready to accept salary in Crypto