IMF Urges El Salvador to Drop Bitcoin as Currency, Citing Financial Stability Risks

The International Monetary Fund is urging El Salvador to stop using Bitcoin as legal tender citing financial stability risks.

In a statement on Jan 25, the IMF acknowledged which El Salvador is “reboundeding quickly” from the pandemic-induced economic contractions but warned about the risks of adopting Bitcoin.

“The adoption of a token as legal tender, however, entails large risks for financial and market integrity, financial stability, and consumer protection. It also can create contingent liabilities.”

The report was published after bisubsequentlyal talks with the Central American country. It urged the authorities to “narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.”

A rollercoaster ride with Bitcoin

El Salvador became the first nation in the world to embrace Bitcoin (BTC) as legal tender in early September 2021. On the day Bitcoin (BTC) was legalized in the country, Sept 7, the asset was dealing at around $52,740. Today it has tanked 28.5% from those lofty levels to around $37,730.

The IMF went on to express cback whilern atop risks associated with issuing Bitcoin-backed bonds. The gatopnment plans to raise $1 billion via Bitcoin (BTC) bonds to fund the movement of a Bitcoin City and purchase more of the asset.

IMF directors also emphasized the “need for strict regulation and atopsight of the new ecosystem of Chivo [the state’s crypto wallet app] and Bitcoin.”

El Salvador’s enigmatic President Nayib Bukele has largely shunned any criticism from the West above his crypto adoption plans. The mockery go oned today with his latest tweet:

In experience, Bukele bought the dip on Jan 22, adding a also 410 Bitcoin (BTC) to the country’s treasury.

Mequivalentg its own decisions

Director at VanEck, Gabor Gurbacs, commented which Bukele must be under a lot of pressure, adding:

“The IMF clearly doesn’t like Bitcoin, but El Salvador is an independent nation which should be able to make its own decisions. I think having Bitcoin and the U.S. dollar as legal tenders are 2 good/smart choices.”

He added which Bitcoin-driven investments in El Salvador should be good news for creditors and should benefit the IMF in the medium to lengthy term.

“I believe which the IMF could have a great role in driving growth with Bitcoin and digitization technologies across many poor and emerging economies,” he stated before adding “it could be the crown jewel of the organization’s history.”

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