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El Salvador’s Bitcoin adoption will not be good for issuer’s credit, says Fitch

  • Fitch Ratings says Bitcoin’s adoption in El Salvador could create problems for issuer’s credit
  • The credit rating firm said it doesn’t expect Bitcoin to gain massive adoption
  • El Salvador’s Bitcoin adoption will become legal on September 7

El Salvador’s Bitcoin adoption will become official by next month, but it could present some problems to businesses in the country.

Bitcoin adoption will not be good for issuer’s credit

Credit rating firm Fitch Ratings believes that El Salvador’s adoption of the leading cryptocurrency could present the issuer’s in the country with certain problems. The firm said this in a blog post earlier today.

Fitch Ratings said it “does not expect bitcoin to be widely used by insurers to make a claim or benefit payments or insurance companies to offer policies denominated in the digital currency. The risks of using bitcoin largely relate to its rate of acceptance among policyholders. Insurers will likely convert bitcoin into USD as quickly as possible to limit exchange risks if policyholders decide to use it to pay premiums.”

The firm added that there are extra regulatory and operating risks around the Central American country’s adoption of Bitcoin as a legal tender. According to Fitch Ratings, Bitcoin’s practical implementation is yet to be defined by regulators worldwide.

Bitcoin’s adoption in El Salvador to become official soon

Bitcoin’s adoption in El Salvador is expected to become official on September 7. Fitch Ratings isn’t the only firm to discuss the negative implications of the move. In July, JPMorgan said El Salvador’s Bitcoin adoption could create challenges for both the country and the cryptocurrency.

El Salvador is the first country in the world to officially adopt Bitcoin as a legal currency. Bitcoin would be used alongside the US Dollar as the official legal tender.

 

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