The IMF Urges El Salvador to Stop Using Bitcoin as a Legal Tender

El Salvador Via Unsplash - Esaú González
El Salvador Via Unsplash - Esaú González

The International Monetary Fund is demanding El Salvador not to use Bitcoin as a legal tender, arguing that there is a major risk associated with the cryptocurrency.

In a report that the IMF released on Tuesday, the organization explained its stance on why the Central American nation should narrow the scope of Bitcoin Law. The latter was passed in June 2021.

In the report, IMF said that using Bitcoin as a legal tender “entails large risks for financial and market integrity, financial stability, and consumer protection, it also can create contingent liabilities.”

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The directors of the IMF also asked for stricter regulation for Chivo, the official e-wallet of El Salvador. The organization cited risks associated with issuing Bitcoin-backed bonds. 

The IMF called the nation for “rebounding quickly” arguing that the large public debt-to-GDP ratio has grown in the country. It also urged El Salvador to reinforce its anti-corruption and anti-money laundering, to be in sync with the global standards.

This isn’t the first time that the IMF raised concerns over El Salvador’s bitcoin move. In June 2021, the institution said adopting Bitcoin as an official tender “raises a number of macroeconomic, financial, and legal issues that require very careful analysis.”

In September 2021, El Salvador officially adopted Bitcoin as a legal tender. This makes the country the first in the world to consider cryptocurrency as equal to the U.S. dollar — El Salvador’s other local currency. Since El Salvador’s move, the country’s president Nayib Bukele has bought over 1,000 coins.