RIYADH: Fitch Ratings downgraded El Salvador further on Wednesday, citing risks from its adoption of bitcoin as a legal tender last year.
Fitch also said that “heightened financing risks stemming from increased reliance on short-term debt,” ahead of an $800 million global bond payment due next January also influenced its decision to cut the nation’s rating to CCC from B-, Bloomberg reported.
President Nayib Bukele’s unorthodox policies have increased the country's perceived risks to investors and rating agencies.
“The weakening of institutions and concentration of power in the presidency have increased policy unpredictability, and the adoption of bitcoin as legal tender has added uncertainty about the potential for an IMF program that would unlock financing for 2022-2023,” Fitch said in its statement.
Last year, Moody's Investors Service downgraded the country and expressed concerns about the use of bitcoin.
El Salvador’s $800 million bonds due in January 2023 rallied 3.4 cents on Wednesday, the most in two years, to 85.40 cents on the dollar, after Finance Minister Alejandro Zelaya said there is a zero percent chance the government will default on it.
The country’s bonds were the worst performers in emerging markets in 2021, according to the Bloomberg Emerging Market USD Sovereign Index.
Daily trading
Bitcoin, the leading cryptocurrency internationally, traded higher on Thursday, rising by 2.18 percent to $44,552 at 1:16 p.m. Riyadh time.
Ether, the second most traded cryptocurrency, was priced at $3,250, up by 4.08 percent, according to data from Coindesk.
Other news:
The Russian government has determined the future of digital currencies in Russia, and the Moscow executive has clarified that the plan aims to integrate cryptocurrency trading into the financial system.
The cabinet also aims to establish control over crypto-related flows in the banking system, according to Bitcoin.com.
In addition to the Finance Ministry’s view on the matter, the federal government wants to allow crypto platforms to operate under a licensing system.
To protect the rights of Russian citizens, investors will be divided into qualified and non-qualified categories, while crypto service providers will be required to meet certain capital and liquidity requirements.
They will also be tasked with informing the Russians of the relevant risks.
