- Dante Mossi says El Salvador receives bitcoin from remittances while towns have bitcoin ATMs.
- He adds the law aims to build on the system already in place but should be rolled out in phases.
- He expressed concerns over volatility, banking, and international regulation.
El Salvador’s President Nayib Bukele excited bitcoin enthusiasts when he announced during the Bitcoin 2021 conference in Miami that his country planned to adopt the crypto as legal tender.
For long-term holders, every inch forward is a step up in bitcoin’s future. The idea of a sovereign state adopting the cryptocurrency could be seen as a whole staircase.
But the same enthusiasm wasn’t matched by some international institutions. A World Bank spokesperson told The Washington Post that it would not support El Salvador’s initiative “given the environmental and transparency shortcomings.” Also, a spokesperson for the International Monetary Fund said that the move raised macroeconomic, financial, and legal issues.
One place El Salvador did find support was with the Central American Bank for Economic Integration (CABEI). Dante Mossi, the executive president who also spent about 16 years at the World Bank, most recently as a senior operations officer, announced CABEI would help El Salvador implement bitcoin as a currency after its government reached out.
Mossi told Insider that what he understood from El Salvador was that the objective is not to eliminate the US dollar as the country’s national currency, but to incorporate bitcoin as another means of exchange.
The primary reason for the move is to ease the cost and fees associated with sending remittances mainly from the US to El Salvador, which Mossi said amounted to about $5 billion annually.
Mossi said CABEI reached out to the US Treasury on June 22, a day before his interview with Insider, in an effort to cooperate on the matter but had not yet received a response. He added that working with the Treasury was important because the majority of money being transferred into El Salvador was coming from the US.
El Saldavor’s Congress provided a 90-day window to address any shortcomings before the law was ratified on the ground. Mossi and his team were in the process of assembling a group of third-party experts who would assist with the transition when Insider spoke to him.
“This is new to CABEI as well. I mean, we are in this sense providing the financing of technical assistance; it’s not CABEI’s strong suit to advise on cryptocurrencies,” Mossi said. “So we are hiring the best minds we can find to provide guidance to El Salvador.”
Details of the policy have received widespread criticism, including the requirement that every economic agent must accept bitcoin as payment when offered by whoever acquires a good or service. The Wall Street Journal’s opinion section referred to the mandate as “forced tender” rather than “legal tender.”
Concerns about bitcoin’s rollout
Bitcoin’s volatility could also leave businesses and financial institutions at a loss. A shopkeeper could accept bitcoin one day, only to find its value drop by 50% when they need to restock their shelves. The crypto was down 49.7% from its mid-April peak on Friday.
Mossi said he was aware of a $150 million trust fund set up by El Salvador’s ministry of finance to provide some cushioning as bitcoin moves through the economy. He suspects it could be based on a moving average though there isn’t yet a clear mechanism as to how that funding will be spent.
“There’s very few reference on countries who have done what El Salvador has done. So we will have to learn by doing and regulation has to be flexible,” Mossi said.
Mossi added that there will also be an initiative focused on educating the population about bitcoin’s uses and volatility.
Mossi is aware of the cracks that need to be filled, and said that based on early conversations CABEI has had with potential contractors, bitcoin should be rolled out in phases.
“I think the headline that should be captured by everyone here from this is that this is a piece of innovation being used by El Salvador in an aggressive way because there’s a definite opportunity to do business better in a cheaper way,” Mossi said.
Mossi was referring to something that came as a surprise even to him. Bitcoin was already being used by people in the US to send money to their families in El Salvador.
Transferring bitcoin has been a way to get around the high fees incurred through traditional routes such as MoneyGram or Western Union. That’s something Mossi is aware of because he recounts seeing World Bank surveys on remittances.
Fees could also be substantial depending on location, and as much as $30 or $40 on a $100 transfer, Mossi said.
Mossi told Insider CABEI has early reports of how the phenomena started and he suspects it has to do with popular tourist surf towns where bitcoin ATM machines began to pop up. Part of their process to understand how these towns are operating and possibly expand on it.
Aside from bitcoin’s volatility, Mossi said El Salvador’s government expressed concern over how local banks will interact with the cryptocurrency. He specifically flagged existing US dollar loans, and whether El Salvadorians will be able to pay them back using bitcoin.
Mossi also expressed concern over major international regulations that could be placed against bitcoin, specifically from the US or the Office of Foreign Assets Control (OFAC).