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Fitch lowers El Salvador rating due to Bitcoin adoption

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

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

Aside from these factors, the statistical rating organisation said that the country’s reliance on short-term debt, an $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 chances of a roll-over. Financial limitations will be increasingly difficult for the country to deal with. As about $1.3 billion is due in August, September, and October, according to Fitch.

According to Fitch, the country would face greater risks in the next years due to “high and expanding 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 the funding it requires in 2022–2023.

El Salvador President recently forecasted a BTC price spike

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, Salvadoran President Nayib Bukele recently forecasted a BTC price spike in the near future. According to the president, there will not be enough Bitcoin for all of the world’s millionaires. If they opt to hold at least 1 BTC.

Fitch Ratings issued a warning to energy providers across the United States in January about crypto miners. Few nations, according to the business, are capable of meeting mining’s energy demands. Mining operations are price-sensitive, according to the firm, and maybe shut down if profits drop.

El Salvador buys its cheapest 410 Bitcoin as prices reach $36K

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