The IMF wants El Salvador to abandon the extremely volatile cryptocurrency Bitcoin as legal tender and severely regulate the electronic wallets that the government has pushed across the country. The board of directors of the global lender “In a statement released Tuesday, the IMF asked authorities to “limit the scope of the Bitcoin law by removing Bitcoin’s legal tender status.”
“The use of Bitcoin as legal cash, on the other hand, poses significant threats to financial and market integrity, financial stability, and consumer protection, according to the IMF statement. President Nayib Bukele was a driving force for the adoption of Bitcoin as legal tender alongside the US dollar. In June, El Salvador’s Legislative Assembly became the first country to do so.
Bitcoin has plummeted in value since late last year, and was somewhat lower on Tuesday than it was when the House voted on June 9. In September, the bitcoin law went into effect. There were concerns from the start that a digital money designed to be independent of governments would attract criminal activities. Bukele marketed adoption as a solution for thousands of Salvadorans to avoid paying money transfer fees when sending money home from relatives living abroad.
El Salvador’s law required all establishments to accept Bitcoin as payment if they have the technological capability. The rollout was a little shaky at first, but it appears to have eased out now. Bukele became a cryptocurrency promoter’s darling, and he’s subsequently talked of constructing a Bitcoin city and issuing Bitcoin-backed bonds, which some IMF directors are concerned about. Bukele’s office said it didn’t have a response to the IMF’s announcement right away.
El Salvador’s Treasury Minister Alejandro Zelaya, on the other hand, cited the IMF’s agreement that increasing financial inclusion is critical and that an eWallet may help, adding via Twitter: “It appears to work for financial inclusion, but you mustn’t do it.” No one is safe from the future. #Bitcoin.”
The IMF praised the administration of Bukele for its handling of the Covid-19 outbreak. Although the country is currently witnessing an outbreak of illnesses, it has been proactive in vaccinating its citizens and has maintained a low death rate. It also stated that the economy is expected to rise by 10% in 2021, after declining by 7.9% the previous year. However, if the government’s spending isn’t reined back, the board sees further issues on the horizon.
“”Continuous budget deficits and expensive debt servicing contribute to enormous and growing finance needs,” according to the statement. “On an unsustainable path, public debt is predicted to climb to almost 96 percent of GDP in 2026 under current policy.”