By Dominique Jacquet

The government of El Salvador has just taken a structuring decision by giving bitcoin the status of legal and official tender.

The Wall Street Journal reports a government attempt to oust the dollar and a return to monetary laxity. The Economist questions the reality of democratic sentiment in the President. In the process, bitcoin loses 10% leading to its fall in the values ​​linked to it, including Coinbase. Well, in terms of crypto-currencies, it is better to make Elon Musk speak!

Another aspect catches my attention. Bitcoin is a financial innovation that generates, as such, a certain fascination. It reminds me of the beginnings of the Parisian futures market, MATIF, the French equivalent of LIFFE. I was then treasurer of the French subsidiary of an American company that sold equipment and offered financing to its clients through crédit-bail or medium-term finance lease. Managing the interest rate risk consisted of adjusting the maturities of assets and liabilities using, among other things, a very efficient and suitable instrument, the interest rate swap, on maturities ranging from 2 to 5 years. As MATIF was new and therefore fashionable, many operators, faced with this same type of risk, were very active in this market and made it known, thus showing their modernity. However, the MATIF concerns the bond market with maturities of between 7 and 10 years. Financing medium-term assets with liabilities with a duration of more than 7 years leads  to taking a very significant risk of the slope of the yield curve. This is what happened to some firms in their sales financing activity.

These few lines do not constitute a rejection of modernity, simply an invitation to keep a cool head in analyzing the problems, to place the efficiency of the solution before all other considerations and to “keep it simple” in the construction of a solution.

In the meantime, El Salvador’s sovereign debt rate has increased with the risk perceived by investors …