Due to the various risks associated with cryptocurrencies, the International Monetary Fund (IMF) has warned El Salvador not to use Bitcoin as legal tender. A day ago, El Salvador’s President Nayib Bukele announced plans to build a “Bitcoin City” powered by a volcano and financed by Bitcoin bonds.
IMF says El Salvador should not use Bitcoin as legal tender
The International Monetary Fund (IMF) warned El Salvador on Monday that the country should not use Bitcoin as legal tender, citing various risks associated with cryptocurrencies.
El Salvador is the first country in the world to adopt Bitcoin legal tender And the U.S. dollar that it has been using for twenty years. The country’s Bitcoin law came into effect in September.In addition, El Salvador Buy 1,120 BitcoinAccording to the President of El Salvador, Nayib Bukele.
The IMF regularly sends Article 4 delegations to member states to consult with government officials before requesting the use of its resources. The International Monetary Fund explained that for El Salvador, “the adoption of Bitcoin as legal tender, the regulation and supervision of Bitcoin service providers, and the electronic wallet Chivo were also discussed.”
In its “Staff Summary Statement on Article 4 Tasks for 2021” for El Salvador, the IMF detailed:
Given that Bitcoin’s price fluctuates greatly, using it as a legal tender will bring significant risks to consumer protection, financial integrity, and financial stability. Its use will also generate financial contingent liabilities. Because of these risks, Bitcoin should not be used as legal tender.
The IMF continues to recommend “reducing the scope of Bitcoin laws” and urges El Salvador to strengthen “regulation and supervision of the new payment ecosystem”.
The most recent statement of the International Monetary Fund came after President Bukler announced plans to build the world’s first Bitcoin City Powered by volcanoes and financed by Bitcoin bonds. He pointed out that apart from value added tax (VAT), Bitcoin City will not have any taxes.
The IMF clarified: “The plan to issue sovereign bonds and use the proceeds to purchase bitcoin and fund infrastructure projects announced on November 20 occurred after the delegation’s technical work was completed and was not discussed with the authorities.”
In commenting on the statement of the International Monetary Fund, Buckler said:
Although we obviously disagree on some things, such as the adoption of Bitcoin, its analysis of our country is very interesting.
What do you think of the International Monetary Fund’s recommendation that El Salvador not use Bitcoin as legal tender? Please let us know in the comments section below.
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