Big Three Fitch Credit Agencies Warn El Salvador Bitcoin Approval Will Have Negative Impact On Insurers

The U.S. credit agency and the Fitch Ratings agency, a member of the “big three” credit institutions, published an article about el Salvador’s acceptance of bitcoin and the making of crypto assets legal tender in the country. Fitch believes the ” risk of volatility “will also face” regulatory and operational risks”once the country passes its new procurement law.

Bitcoin adoption in el Salvador carries new risks, Fitch Ratings says
21 days later, El Salvador’s bitcoin bidding law will take effect after a bill to make bitcoin legal tender in the country was approved by a majority of El Salvador’s Congress on June 9. Since then, a number of proposals have emerged to select a country to buy bitcoins from organisations such as Bank of America to set up individuals such as Christine Lagarde, a member of the International Monetary Fund (IMF) and the bank for international payments (BIS) and President of the European Central Bank (ECB).

Fitch Ratings, now one of the three largest ratings agencies, has published an article on why it might be risky for Salvador to accept bitcoin. First, Fitch does not believe bitcoin (BTC) will be widely used by the insurance industry, and if they use bitcoin, “insurers will convert bitcoin into US dollars as soon as possible to limit exchange rate risks as policyholders decide to use it to pay premiums.”

The bitcoin bidding Act, which must be approved on September 7, 2021, “seems unnecessarily hasty and allows insurance companies little time to adjust to the terms,” he said. The Fitch Ratings report October adds::

The ability of insurers to minimize shelf life will depend on whether the regulatory and operational framework will allow bitcoin to be immediately converted into US dollars, which is unclear for the time being. Insurers who keep bitcoin on their balance sheets longer will be sharply prone to price fluctuations, increasing asset risk, a negative credit factor

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