The International Monetary Fund (IMF) has recommended that El Salvador stop using bitcoin as legal tender, pointing to the financial and consumer risks associated with the cryptocurrency, voluntarily by the country’s president, Nayib Bukele. Soon after the announcement of plans for the world’s first bitcoin city operated. and financed by cryptocurrency bonds. El Salvador, a country that has used the US dollar as its primary fiat currency for more than two decades, legalized bitcoin as an official tender in September, and also benefited from the move. able to do.
In a statement, the IMF acknowledged that bitcoin, and cryptocurrencies in general, can facilitate efficient payments, but allowing them as legal tender could pose problems for financial stability. “Given bitcoin’s high price volatility, its use as fiat poses significant risks to consumer protection, financial integrity and financial stability. Its use also gives rise to fiscal contingent liabilities. Because of those risks, bitcoin has to be protected.” should not be used as legal tender. The staff recommends reducing the scope of the bitcoin law and urges strengthening regulation and supervision of the new payments ecosystem,” the IMF said in a statement.
The global agency also called on El Salvador to reduce the scope of its bitcoin legislation and strengthen regulation and supervision of the new payments ecosystem.
El Salvador plans to build the world’s first “Bitcoin City,” initially funded by bitcoin-backed bonds, President Nayib Bukele said over the weekend, using cryptocurrencies to boost investment in the Central American country. Doubled your bet to use.
Speaking at an event in El Salvador kicking off a week-long promotion of bitcoin, Bukele said the planned city in the eastern region of La Union would get geothermal energy from the volcano and no value-added tax (VAT) except. Tax will not be levied.
The IMF regularly conducts Article IV missions for member states to consult with government officials before requesting access to IMF resources. The IMF clarified, “Plans to use the proceeds to issue sovereign bonds and purchase bitcoin and fund infrastructure plans, announced on 20 November, occurred after the completion of the mission’s technical work, and were not discussed with officials.” “
This is not the first time the IMF has warned a Latin American country of being bitcoin-forward. Earlier this year, when El Salvador passed its landmark bitcoin law, there was a predictable reaction from the IMF opposing its prospects. Nevertheless, El Salvador had operated through its plan, despite many of its warnings against the risks of a bitcoin-legitimate financial system. The country has set up its bitcoin-powered Chivo Wallet app as well as several ATMs to facilitate daily transactions and remittance transfers in bitcoin.