Two House lawmakers have submitted legislation aimed at reducing the dangers to the US financial system as a result of El Salvador’s legalization of Bitcoin.
Legislation to mitigate Risks to the US Financial System posed by El Salvador’s Bitcoin Law
Representatives Norma Torres of California and Rick Crawford of Arkansas introduced legislation on Monday directing the State Department to develop a plan to mitigate potential risks to the US financial system based on an analysis of the risks to El Salvador’s “cybersecurity, economic stability, and democratic governance” following the country’s September 2021 recognition of Bitcoin (BTC) as legal tender. The El Salvador Accountability for Cryptocurrency Act is a companion measure to bipartisan legislation presented in the Senate in February.
The Senate bill required the Secretary of State and heads of Federal departments and agencies to report to Congress within 60 days on a plan to “mitigate any potential risk to the United States financial system posed by the adoption of a cryptocurrency as legal tender” in El Salvador and other countries that accept the US dollar, including apparently Ecuador, Micronesia, Palau, East Timor, Zimbabwe, and the Marshall Islands. Torres highlighted IMF assessments stating that using Bitcoin as legal cash included “significant dangers” to financial stability, financial integrity, and consumer protection.
“El Salvador is an independent democracy, and we respect its right to self-government, but the United States must have a plan in place to safeguard our financial systems from the risks associated with this decision, which appears to be a hasty gamble rather than a deliberate embrace of innovation,” Torres said.
Senator James Risch of Idaho, the Senate bill’s author, said in February that El Salvador’s acceptance of Bitcoin as legal cash created “serious concerns about the economic stability and financial integrity of a vulnerable United States trade partner in Central America.”
Senator Bill Cassidy of Louisiana, one of the bill’s co-sponsors, said that the country’s Bitcoin Law might “[open] the door for money laundering cartels” and jeopardize the US dollar’s position as the world’s reserve currency.
The President’s, Nayib Bukele, Response
The measure cleared the Senate Foreign Relations Committee in March and is expected to go on to the full Senate for consideration. El Salvador’s President Nayib Bukele responded to the bill’s introduction in February by encouraging the US to “keep out” of the country’s domestic affairs, and to the bill’s advancement the following month by asserting that “the US Government DOES NOT STAND FOR FREEDOM.”
Using his Twitter account, Bukele has announced many BTC purchases totalling 1,801 BTC as of January — almost $83 million at the time of publishing — since El Salvador’s Bitcoin Law entered into force. According to a March 23 announcement from the Salvadoran government, it has postponed the issuance of BTC-backed bonds to support its ‘Bitcoin City’ project.