The World Bank recently rejected a request from El Salvador for assistance with its adoption of Bitcoin as legal tender.
Despite this, President Nayib Bukele’s dogged pursuit to make Bitcoin a legal tender in El Salvador may soon become a reality as the World Bank’s founding document stipulates that the Bank must accept payments in the legal tender of any of its member states.
By implication, this means that the World Bank in keeping with its rules will have to accept deposits made by El Salvador in Bitcoin.
The 1944 Articles of Agreement is the World Bank’s founding document. It has a central theme that is centered around its commitment to accept payments from member states in local currencies. Article V, section 12 of the document defines acceptable forms of payment to the bank by member states as “notes or similar obligations issued by the Government of the member or the depository designated by such member”.
The charter also states that the World Bank will be obligated to continuously re-value the currencies of its member states in its holding. If the currency appreciates against a benchmark such as the USD, it has to pay the gains to the country, as well as accept more of the currency of the country to make up the difference if the value should drop.
With Bitcoin being legal tender in El Salvador, the World Bank not only has to accept it from the country, but it also has to pay the country gains if the value of Bitcoin should increase, or accept more Bitcoin from El Salvador if the value reduces. This is according to Section 9 of Article II of the charter.
The development has been met with multiple reactions by the cryptocurrency community. Questions are being raised to know if the World Bank cannot just change the articles. Daniel Brr, a cryptocurrency influencer chimed in that the fact that the World Bank may have to “squirm out of this” or implement acceptance of Bitcoin from El Salvador is an interesting event to monitor in the next few days.
A further issue of contention has been the reasons cited for the World Banks’ rejection of giving aid to El Salvador. A spokesperson for the world bank was quoted saying El Salvador’s adoption of Bitcoin as Legal tender “is not something the World Bank can support given the environmental and transparency shortcomings.”
The crypto community has raised objections to these reasons citing that Bitcoin is the most transparent currency there is. The blockchain being an immutable record, every single transaction ever made since its inception can be monitored publicly.
Countering the environmental concerns, an Aljazeera report has revealed that the World Bank has invested over $12 billion in fossil fuel projects over the past six years. The report also noted that the World Bank also accepts Gold as payment from member states, even though gold mining emits about 0.8 tonnes of CO2 per ounce of gold “so they’ll be happy to know that, by some estimates, most Bitcoin miners are already using renewable energy.”