The World Bank’s founding document obliges the developmental body to accept payments in the local currencies of its members. In El Salvador’s case, that means bitcoin and bitcoin-backed debt securities.<\/b>
\nThe World Bank has poured cold water on El Salvador\u2019s adoption of bitcoin as legal tender, saying it cannot support the move due to \u201cenvironmental and transparency\u201d concerns. With or without its blessing, though, the developmental body may soon be forced to accept bitcoin payments from central banks. 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 \u201cforms of holdings of currency\u201d as follows: So, as well as allowing payments in \u201cthe member\u2019s currency\u201d, the charter allows central banks to pay with \u201cnotes or similar obligations\u201d 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\u2019s 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 \u201creal\u201d benchmark like USD). If the local currency has appreciated, it says, the World Bank should do the decent thing and hands the gains back: Conversely, if the local currency has depreciated, the member gets margin called and has to \u201cpay to the Bank within a reasonable time an additional amount of its own currency sufficient to maintain the value\u201d. 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\u2019s sovereign right to choose its own currency. That\u2019s 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,\u201d a spokesperson waffled. \u201cWhile 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 $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\u2019s carbon footprint. So they\u2019ll 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 stored on an immutable digital ledger that remains fully visible to all market participants. That makes it, by far, the most transparent monetary network that has ever existed. No funny business allowed.<\/p>\n