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Bolivia’s Strategic Shift Towards Cryptocurrency Regulation
Bolivia’s Central Bank (BCB) has initiated a significant partnership with El Salvador’s National Commission for Digital Assets (CNAD) to harness El Salvador’s expertise in cryptocurrency regulation and integration. This collaboration aims to modernise Bolivia’s financial framework as the nation’s currency, the boliviano, faces increasing economic pressure.
Partnership Details
The formal agreement, signed by BCB acting president Edwin Rojas Ulo and CNAD president Juan Carlos Reyes García, outlines a framework for ongoing cooperation between the two nations. This arrangement focuses on the exchange of technical knowledge, regulatory expertise, blockchain tools, and risk analysis methodologies, without a set expiration date.
Economic Context
Bolivia’s decision to seek El Salvador’s partnership comes amid serious challenges to its financial stability. The boliviano has seen a drastic decline, with the country’s foreign exchange reserves plummeting from US$12.7 billion (AU$19 billion) in mid-2014 to just US$165 million (AU$256 million) as of April this year. In light of these pressures, some local merchants have started quoting prices in the USDT stablecoin, a significant shift indicating the growing acceptance of digital currencies.
Bolivia’s Crypto Evolution
The BCB’s move is part of a broader initiative stemming from Decree 082/2024, which has paved the way for expanded cryptocurrency usage within Bolivia. Over the past year, the volume of digital asset transactions has surged from US$46.5 million (AU$71.1 million) to US$294 million (AU$450 million). This growth reflects a commitment by the BCB to "modernise the financial system and deepen financial inclusion" for its citizens.
El Salvador, which has three years of direct experience with cryptocurrency policy following its 2021 Bitcoin Law — which recognised Bitcoin as legal tender — offers valuable insights. Despite accumulating over 6,200 Bitcoins, reports suggest that El Salvador may have paused further purchases after securing a loan from the International Monetary Fund (IMF).
Conclusion
As Bolivia embraces this new path towards cryptocurrency regulation, the collaboration with El Salvador could mark a pivotal moment in its financial evolution. By leveraging successful strategies from El Salvador, Bolivia aims to revamp its economic landscape, ensure greater financial inclusion, and navigate the challenges posed by its beleaguered currency. This partnership not only signals a proactive approach to modernising its financial infrastructure but also highlights the growing influence of digital currencies in South America.
