The IMF report on El Salvador is positive…except for everything related to Bitcoin

In a recent report, the International Monetary Fund praised El Salvador’s handling of the COVID-19 situation and announced that its economy has grown by 10% in 2021. The IMF also recognized the Salvadoran government’s efforts to reduce crime, “diversify the energy matrix, promote economic diversification, and enhance financial inclusion.” However, when it comes to Bitcoin, the IMF is completely opposing. As they should be. Because Bitcoin makes the IMF irrelevant.

But first, let us understand that the title of this report is “El Salvador: Staff’s summary statement on the fourth task in 2021“its about:

“The concluding statement describes the preliminary findings of the IMF staff at the end of the official staff visit (or’visit’), in most cases to member countries. According to Article 4 of the IMF Agreement, the visit is a regular (Usually annual) as part of the negotiation.”

Anyway, let’s take a look at the IMF’s weird view of Bitcoin.

BTC price chart for 11/23/2021 on Oanda | Source: BTC/USD on TradingView.com

How does the International Monetary Fund view Bitcoin as legal tender?

After praising El Salvador’s efforts to promote “financial inclusion and growth”, the International Monetary Fund criticized the tools used by the government to achieve this goal.

“Given the large price fluctuations of Bitcoin, its use as a legal tender will bring significant risks to consumer protection, financial integrity, and financial stability. Its use will also generate financial contingent liabilities. Due to these risks, Bitcoin does not Should be used as legal tender. The staff suggested reducing the scope of the Bitcoin law and urged to strengthen the supervision of the new payment ecosystem.”

Translation: The International Monetary Fund can’t even think of a good reason to make Bitcoin a legal tender. A bitcoin is a bitcoin. The volatility of cryptocurrencies is inherently related to the assets we compare with. In this case, the dollar. It is also important to remember that Bitcoin is legal tender in El Salvador along with the U.S. dollar. If people don’t want to fluctuate, they can easily convert all their funds into another currency that is considered legal tender.

The IMF also conveniently ignores the fact that Bitcoin’s volatility can bring positive results to its users. Their other option, the U.S. dollar, is going through a distinctive period of inflation. In addition, when the US government prints more money, its citizens will benefit from it. But El Salvador does not. A dollarized country that cannot control the printing press will reduce its purchasing power due to relentless inflation, but will not artificially obtain airdrops and inorganic currency to stimulate the economy.

Does the IMF have any other suggestions?

Of course, they do. First, they praised El Salvador’s efforts in financial inclusion. Then, the IMF recommends implementing exactly the same measures to exclude 70% of the population from the financial system.

“Stricter regulation and supervision of the new payment ecosystem should be implemented immediately to protect consumers, anti-money laundering and counter-terrorism financing (AML/CFT), and risk management.”

Why don’t people in El Salvador have a bank account? Do they think it is voluntary? Does the IMF not know that their outdated and inefficient methods will cause bottlenecks? Bad actors have an incentive to bypass AML and KYC procedures. They are easy to do. Ordinary people cannot produce all these documents. For banks, the cost of processing all this data makes acquiring new customers very expensive. There are no incentives to serve low-income groups.

“The recently announced plan to use the proceeds of the new sovereign bond issuance to invest in bitcoin, and the impact of trading bitcoin more widely, requires a very careful analysis of the impact on financial stability and potential risks.”

Translation: what’s going on A bitcoin city?!!!!!! they are Establish a pet hospital? ! alarm! alarm!

U.S. suspends relations with El Salvador

In semi-related news, Reuters bulletin The US Chargé d’Affaires Jean Manes stated on the local TV station that relations between the two countries have been put on hold. “Obviously, we paused a bit because the Salvadoran government did not signal that it was interested in our relationship,” she said. “We have provided a bridge on behalf of the White House and the State Department, and the (El Salvador) government decided not to accept it. As far as we are concerned, we are interested in establishing the best relationship with El Salvador.”

Of course, Manes. This sounds completely believable. There is nothing suspicious here.

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