Money laundering fears surface as El Salvador makes bitcoin official currency

Supporters say it will lower commission costs for billions of dollars sent from abroad: critics warn it may fuel money laundering.

The change, effective 7 September, means businesses should accept payment in bitcoin alongside the US dollar, the Central American country’s official currency since 2001 and which will remain legal tender.

President Nayib Bukele has pushed for adopting the cryptocurrency, saying it will save Salvadorans about $400m (€335m) on commissions for remittances while giving access to financial services to those without bank accounts.

“It’s going to be beneficial … we have family in the United States and they can send money at no cost, whereas banks charge,” Reuters news agency quoted Reina Isabel Aguilar as saying.

She is a shop owner in El Zonte Beach, 50km southwest of capital San Salvador and known as Bitcoin Beach because it aims to become one of the world’s first bitcoin economies.

Doubters say bitcoin could increase the nation’s regulatory and financial risks, while polls show Salvadorans are wary of the volatile digital currency which can shed hundreds of dollars in value in a day. Low internet penetration across the country may impede the uptake of bitcoin.