Bitcoin Must Be Accepted By World Bank, According To Charter – Periódico Página100 – Noticias de popayán y el Cauca

Bitcoin Must Be Accepted By World Bank, According To Charter

The World Bank has poured cold water on El Salvador’s adoption of bitcoin as legal tender, saying it cannot support the move due to “environmental and transparency” concerns.

But the developmental body may soon be forced to accept bitcoin payments from countries that have embraced the cryptocurrency.

Its founding document, the 1944 Articles of Agreement, outlines the procedures and principles by which the World Bank pledges to engage with sovereign governments. A central theme in the document is its commitment to accept payments from member states in local currencies.

Section 12 of Article V defines acceptable “forms of holdings of currency” as follows:

  • The Bank shall accept from any member, in place of any part of the member’s currency, paid in to the Bank under Article II, Section 7 (i), or to meet amortization payments on loans made with such currency, and not needed by the Bank in its operations, notes or similar obligations issued by the Government of the member or the depository designated by such member, which shall be non-negotiable, non-interest-bearing and payable at their par value on demand by credit to the account of the Bank in the designated depository.

So, as well as allowing payments in “the member’s currency”, the charter allows central banks to pay with “notes or similar obligations” backed by their reserves.

These are effectively IOUs from governments. They can be backed by dollars. They can be backed by precious metals (the US Federal Reserve guaranteed its notes with gold until 1934, and with silver until the 1960s). Or they can be backed by bitcoin; perhaps, in El Salvador’s case, the $150m bitcoin fund being established by Banco de Desarrollo de El Salvador, the national development bank.

Things gets more awkward. Section 9 of Article II states that holdings paid into the bank by members should be continually re-valued (presumably against a “real” benchmark like USD). If the local currency has appreciated, it says, the World Bank should do the decent thing and hands the gains back:

  • Whenever the par value of a member’s currency is increased, the Bank shall return to such member within a reasonable time an amount of that member’s currency equal to the increase in the value of the amount of such currency

Conversely, if the local currency has depreciated, the member gets margin called and has to “pay to the Bank within a reasonable time an additional amount of its own currency sufficient to maintain the value”. Or, put another way: when bitcoin starts tanking, the World Bank starts stacking. Nice.

All of this depends, of course, on whether or not the body will respect El Salvador’s sovereign right to choose its own currency.

That’s not a foregone conclusion. Reuters asked them about that yesterday and got a decidedly arsey response. “We are committed to helping El Salvador in numerous ways, including for currency transparency and regulatory processes,” a spokesperson waffled. “While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings.”

The World Bank, by the way, has invested more than $12bn in fossil fuel projects over the past six years, representing at least 6% of its total investment portfolio. It also accepts gold payments from members, despite gold mines emitting on average 0.8 tonnes of CO2 for every ounce of gold produced.

Still, they’re worried about bitcoin’s carbon footprint. So they’ll be happy to know that, by some estimates, 76% of bitcoin miners are already using renewable energy.

Oh yes, and every transaction ever made on the bitcoin network is recorded on an immutable digital ledger that is fully visible to all market participants. That makes it, by far, the most transparent monetary network that has ever existed. No funny business allowed.

SOURCE: www.forbes.com

BY: Martin Leo Rivers

ILLUSTRATION: Salvador Melendez/AP

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