Fitch Ratings warns that El Salvador’s “Bitcoin Law” will pose a risk to local insurance companies

Fitch Ratings has become the latest global credit rating agency to warn El Salvador not to adopt Bitcoin.Bitcoin) As a legal tender, expressed concern that crypto assets may bring systemic risks to Latin American countries.

Fitch Ratings cited the country’s lack of clarity regarding the implementation of Bitcoin in the mainstream market warn Regarding the inherent volatility and operational risks of citizens related to the crypto ecosystem. In addition, the agency also pointed out that El Salvador continues to hold low-credit-quality securities, saying that “additional holdings of high-risk assets will only exacerbate this risk.”

In early June, El Salvador’s Legislative Assembly passed President Nayib Bukele’s controversial Bitcoin Law to BTC will be recognized as legal tender Together with the U.S. dollar, it will start on September 7, 2021. Therefore, all Salvadoran companies will be required to accept Bitcoin in exchange for goods or services.

Fitch predicts that insurance companies, which account for 21% of El Salvador’s total capital in 2020, will hesitate whether to use Bitcoin for claims or welfare payments. The agency speculates that if policyholders choose to pay premiums in digital currency, insurance companies may seek to “convert Bitcoin into U.S. dollars as soon as possible to limit exchange rate risk.”

related: Enforcement and Coexistence: How El Salvador’s Bitcoin Law is Changing Global Finance

As the government and leaders continue to weigh the pros and cons of Bitcoin entering mainstream finance, El Salvador’s Finance Minister Alejandro Zelaya assured the International Monetary Fund (IMF) that the country will continue to use U.S. dollars and Bitcoin.

Prior to this, the country had applied for a loan of US$1.3 billion from the International Monetary Fund, which has now proved Conflict of interest in a UN-led organizationIn addition, the World Bank also Quit help El Salvador Make Bitcoin a legal tender.