El Salvador’s Bitcoin Decision Opens Banks To Money Laundering And Terrorist Financing Risk-Fitch

File photo: The representation of the Bitcoin cryptocurrency can be found in this pictorial photo taken June 7, 2021.Reuters / Edgar Sue / Illustration / File photo

June 25, 2021

(Reuters) – Bitcoin fiat currency in El Salvador fiat currency means banks face higher risks, including violations of anti-money laundering and terrorist financing rules, the agency said on Friday. Fitch rating in a report. Declared.

The Bitcoin decision, which is due to take effect on September 7, will increase regulatory, financial and operational risk for financial institutions, including the possibility of violating international standards for preventing money laundering and terrorist financing. “Fitch said.

The ability to use Bitcoin for all obligations, including bank loans, could concentrate Bitcoin traffic in Central American countries, “the risk of illicit activity flowing through the Salvadoran financial system.” It has the potential to increase, ”says Fitch.

Salvadoran President Nayib Bukele said the use of Bitcoin was optional on Thursday. This means that anyone who receives Bitcoin payments can choose to automatically convert to US dollars, the legal tender of El Salvador for 20 years.

Fitch must be fully compliant with global standards set by the Paris-based Financial Activities Task Force, given that “Bitcoin’s lack of transparency may increase the risk of money laundering.” I added that there is.

Bukele is a bitcoin for large international transfers to countries like El Salvador, where a fifth of 2019’s gross domestic product was tied to money returned by foreign workers, according to the World Bank. Advertised the benefits.

(Report by Rodrigo Campos)