Citing environmental concerns, The World Bank rejected a request from El Salvador to help implement the use of Bitcoin as legal tender.
According to the BBC, the “international lender” also “cited concerns over transparency,” indicating that El Salvador may struggle to meet its deadline of accepting Bitcoin throughout the country within the next three months.
“We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes,” a World Bank spokesperson told Reuters. “While the government did approach us for assistance on Bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings,” they added.
As The Washington Post noted, “El Salvador’s finance minister, Alejandro Zelaya, had told reporters Wednesday that the government hoped to receive technical assistance from the World Bank, as well as advice on coming up with standards for the use of the cryptocurrency.”
“The organization distributes billions of dollars to developing nations through loans and grants each year, and its involvement in El Salvador’s bitcoin plan would have been seen as a sign that the experiment was backed by powerful players in the international development world,” The Washington Post added.
El Salvador made history last week, as the country’s legislature passed a law making Bitcoin legal tender in the Central American nation.
“The designation allows bitcoin, the world’s largest cryptocurrency by market value, to be used to pay taxes. Businesses would also be obligated to accept bitcoin for payment, though those without the ability to process those payments would be exempt, according to the bill. Converting bitcoin into other currencies will no longer be subject to capital gains tax,” explained The Wall Street Journal. “To allow the automatic convertibility of bitcoin to U.S. dollars, El Salvador’s government said it would set up a trust at the Development Bank of El Salvador. The Latin American country, one of the region’s poorest, has struggled over the years to manage its finances and has used the U.S. dollar as its official currency since 2001.”
According to El Salvador’s government, the use of cryptocurrency could fuel “financial inclusion,” with the bill noting that “70% of its population doesn’t have access to traditional financial services.”
Environmental concerns regarding cryptocurrency — specifically, the mining of cryptocurrency — is not unfounded. Researchers at Cambridge University found in February that, in terms of annual energy consumption, Bitcoin now consumes more power than Argentina, the Netherlands, and the United Arab Emirates, at 121.36 TWh. According to Digiconomist’s Bitcoin Energy Consumption Index, a tool created by data scientist Alex de Vries, Bitcoin now has a “carbon footprint comparable to that of New Zealand,” producing an estimated 36.95 megatons of C02 per year.
Senator Elizabeth Warren slammed Bitcoin in this context in early June, saying “Bitcoin requires so much computing activity that it eats up more energy than entire countries.”
“One of the easiest and least disruptive things we can do to fight the [Climate Crisis] is to crack down on environmentally wasteful cryptocurrencies,” Warren added,
Bitcoin requires so much computing activity that it eats up more energy than entire countries. One of the easiest and least disruptive things we can do to fight the #ClimateCrisis is to crack down on environmentally wasteful cryptocurrencies. pic.twitter.com/derGr1bjuq
— Elizabeth Warren (@SenWarren) June 9, 2021