How El Salvador’s Bitcoin Law may change global finance – Cointelegraph Magazine

“Clearly, the thing that’s transforming is not the technology — the technology is transforming you.” Jeanne Ross, formerly of the MIT Sloan Center for Information Systems Research

If El Salvador’s “Bitcoin Law” was “the shot heard round the world” for Bitcoin, then when the International Monetary Fund (IMF) and the World Bank questioned the legislation, it was the incumbent empire striking back. 

However, if El Salvador can implement its Bitcoin Law despite numerous technical and legal hurdles, it may force changes upon the organizations that oppose it and hasten reforms in how United States tax and commercial laws treat cryptocurrencies. 

The surprise shot heard round the world

After winning approval by a supermajority of its congress, El Salvador enacted its Bitcoin Law and became the first country in the world to adopt Bitcoin as legal tender. The Bitcoin Law passed mere days after El Salvador’s president, Nayib Bukele, first announced his plans to introduce it. The short time between Bukele’s surprise announcement and the passage of the Bitcoin Law prevented opponents from blocking it.

However, in a prescient series of tweets, Avanti Financial Group CEO and Bitcoin advocate Caitlin Long predicted “a big fight” over the Bitcoin Law and warned that “the world is about to pressure it [El Salvador] given what’s at stake.” 

1/ THREAD ABOUT A HISTORIC DAY in #bitcoin: #ElSalvador president publicly announced support for legislation to make #BTC legal tender. *IF* it does become law, it wld have many secondary effects. Steel yourselves bc a big fight on this probably coming thohttps://t.co/BrrNxaLzpZ

— Caitlin Long 🔑 (@CaitlinLong_) June 6, 2021

The IMF’s leverage and lending Pools

Indeed, the day after El Salvador passed the Bitcoin Law, the IMF claimed that the legislation raised “a number of macroeconomic, financial and legal issues that require careful analysis.” The World Bank, which frequently cooperates with the IMF, joined the fray and proclaimed that it had rejected El Salvador’s request for help with implementing its Bitcoin Law because of “environmental and transparency shortcomings.” While these proclamations from powerful Washington, DC-based multinational organizations embody the fight that Long predicted in her tweets, the Bitcoin Law’s forward momentum may hasten reform in how these organizations and laws in the United States address cryptocurrency.

Based on its governing documents, the IMF is more likely to resist the Bitcoin Law by exerting economic pressure than by legally challenging the legislation of a sovereign nation. IMF member nations, including El Salvador, are bound by a code of conduct memorialized in the IMF Articles of Agreement. 

These articles require members to allow their currency to be exchanged for foreign currencies freely and without restriction, keep the IMF informed of changes in financial and monetary policies that will affect fellow members’ economies, and modify their policies to accommodate the needs of the entire membership. The IMF administers a pool of money from which its members can borrow “to help nations abide by the code of conduct” in its Articles of Agreement. In other words, the IMF enforces its articles through access to its lending pool.

Since El Salvador is seeking a $1.3 billion loan from the IMF to revitalize its economy, the IMF could attempt to restrict or withhold this important funding based on the Articles of Agreement. For example, the IMF could argue that it was not adequately informed in advance of the Bitcoin Law. It could also demand that El Salvador limit or modify the Bitcoin Law to accommodate “the needs of the entire membership.” 

However, it appears that concerns over punitive action by the IMF based on the “issues” it raised with the Bitcoin Law may have been overblown. After the IMF voiced its concerns, El Salvador’s finance minister, Alejandro Zelaya, assured the IMF that the…