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Fitch downgrades El Salvador over Bitcoin acceptance

The country’s credit rating has been downgraded by Fitch due to “policy instability” and “adoption of Bitcoin as legal tender.”

El Salvador is about to get another slap on the wrist from a traditional financial institution for its “forbidden” love of Bitcoin (BTC).

El Salvador’s long-term Issuer Default Rating has been downgraded by Fitch Ratings from B- to CCC, citing “policy uncertainty” and the “adoption of Bitcoin as legal money” as some of the reasons for the downgrading.

Apart from these factors, the statistical rating body said that the country’s reliance on short-term debt, a $800 million Eurobond payment due in January 2023, and a large fiscal deficit prevent it from receiving a higher rating.

Furthermore, Fitch believes that El Salvador’s increased short-term debt has harmed the government’s capacity to pay its total debts, increasing the danger of a roll-over. Financial limitations would be more difficult for the country to deal with, according to Fitch, with about $1.3 billion due in August, September, and October.

According to Fitch, the country would face higher risks in the next years due to “high and growing financial demands.” According to the firm, the country’s use of Bitcoin as legal cash adds to the uncertainties surrounding a potential IMF programme that may give the country with the funding it requires in 2022–2023.

If the country achieves Fitch’s requirements, which include consistency in debt settlement by “unlocking dependable sources of finance” and a fiscal adjustment concentrating on debt sustainability, the country’s rating could improve over time.

Meanwhile, President Nayib Bukele of El Salvador recently stated that a BTC price increase would be imminent. The president stated that if all millionaires in the world decide to purchase at least one Bitcoin, there will not be enough Bitcoin to go around.

Fitch Ratings issued a warning to energy suppliers across the United States about crypto miners in January. According to the business, just a few states are capable of meeting mining’s energy demands. Mining operations are price sensitive, according to the firm, and may be shut down if profits fall.


Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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