St Kitts and Nevis: Prime Minister of St Kitts and Nevis- Dr Terrance Drew, attended the Electronic Cash Conference 2022 on November 12, 2022, and talked about the possibility of Bitcoin Cash being introduced as the legal tender in the local financial space.
He stated that the financial safety and security of citizens and residents is a matter of high priority while pointing out that it is tough to place Bitcoin cash for public use. He added that he would look out for “opportunities”.
Cryptocurrencies have experienced massive growth in value, utility and popularity since their introduction in 2009. Various crypto developers have been looking towards Latin America and the Caribbean to make the currency legal. The developers are reaching the Governments of some Small Island Developing States, such as St Kitts and Nevis, intending to have their cryptos accepted by law.
However, the acceptance of the proposals of crypto developers by the governments of countries like St Kitts and Nevis will not be helpful for them. The six nations of the Caribbean- Antigua and Barbuda, St Kitts and Nevis, Saint Lucia, Dominica and St Vincent and the Grenadines have a joint currency, which is known as the Eastern Caribbean Dollar (ECD). So, it will be very tough for the developers to make Bitcoin Cash a legal tender with the acceptance of St Kitts and Nevis.
If St Kitts and Nevis accept the proposals of making Bitcoin Cash a legal tender, it will impact the currency of these five nations. All digital currencies involve market risks due to high price fluctuations, easy manipulation and lack of backing of an actual asset. The decision by St Kitts and Nevis government will highly impact the economy of these countries.
Moreover, St Kitts and Nevis will have to take permission from the Eastern Caribbean Central Bank to legalize Bitcoin Cash. Without the guidance of the Bank, the Government can’t make any decision concerning cryptocurrencies. However, the Bank will not grant the permission because of its negative impact on the Eastern Caribbean Dollars. Various risks, such as a risks-averse economic climate, increased regulation, crypto scams and many more, will resist the Bank from granting the permission. Another disadvantage is that most cryptocurrencies cope with: volatility. As a result, some currencies may quickly lose their value.
Bitcoin Cash could adversely impact the financial stability of the country and damage consumer protection. Various economists also argue that the value of cryptocurrencies is not guaranteed because of the lack of commercial or central bank involvement. So the Eastern Caribbean Central Bank will not take the risk and never grant permission to St Kitts and Nevis
Further, the second point, which stood as the big wall against the legalisation of Bitcoin Cash, is known as Due Diligence. At the conference, Prime Minister Dr Terrance Drew highlighted that due-diligence checks were presently being prioritised by the Government ahead of any significant decision concerning the cryptocurrency’s official use.
He stated that while keeping the financial safety of the people of St Kitts and Nevis in mind, there will be no leverage in the process of the due diligence.
Due diligence will be conducted by an independent firm like KPMG, which is a professional services firm that helps its clients with a variety of financial, tax, business development, and technology consulting service. It provides accountancy services to banks and multinational companies and assesses the risk management of these organisations.
PM Terrance Drew stressed that the independent firm and reputed firm would conduct the due diligence with the aim of securing the national interests. Due diligence will be considered as the significant factor in regard to Bitcoin Cash.
These three pillars will resist the developers from taking a step towards the legislation of Bitcoin Cash in St Kitts and Nevis. Hence, the decision will not work well for St Kitts and Nevis, and it can also cause damage to the Government.
The International Monetary Fund (IMF) also specified the risks involving these digital currencies. It stated that the currency poses a massive threat to consumer protection, financial integrity and macro-financial stability of a country.
Various factors outlined that the acceptance of Bitcoin Cash as a legal tender will negatively impact St Kitts and Nevis. Moreover, the currency is also said to be bad for the environment and St Kitts and Nevis is known as one of the most beautiful islands of the Caribbean, which is full of natural reserves.
Further, a country named El Salvador became the first in the world to use bitcoin as a legal tender alongside the US Dollar. Now, the economy of the country is tumbling as the country lost $52 million by gambling on digital assets, leading the country towards a financial crisis.