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Policy & Regulation

IMF wants El Salvador to drop Bitcoin’s status as legal tender

26 Jan 2022 : 16:15
2 min read
  • IMF urges El Salvador to drop Bitcoin as its legal tender
  • The organization cited risk to financial stability, financial integrity, and consumer protection

The International Monetary Fund or IMF has asked the President of El Salvador, Nayib Bukele, to drop the world’s biggest cryptocurrency, Bitcoin (BTC), as legal tender. The country officially adopted BTC as legal tender in September. 

IMF considers safety issues

As per the CNBC report, IMF directors “stressed that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.”

The country has bought several Bitcoins under the leadership of Nayib Bukele, who has continuously bought the current dip. However, due to buying BTC, the country is experiencing a loss as BTC fell below $34K. It seems that the IMF has some concerns about BTC adoption by El Salvador.

The IMF went on to say in their report that directors have talked about their concerns over the Bitcoin Bonds that the country has issued in order to complete its goal of building a Bitcoin City and raising $1.1 billion via these Bonds. These Bonds were released in a partnership with Blockstream, a digital assets infrastructure company.

Missing regulations

The government of El Salvador released a cryptocurrency wallet called Chivo, which was the center of many complaints from users. The IMF revealed that Chivo wallet could “boost financial inclusion” but emphasized the need for “strict regulation and oversight.”

Moreover, the IMF had recently called for cryptocurrency adoption and published a blog on the same. The firm called for a ‘comprehensive, consistent, and coordinated approach towards crypto adoption. They also talked about licensing crypto exchanges for “storage, transfer, settlement, and custody of reserves and assets.”

It is also to be noted that the President of El Salvador, Nayib Bukele, replied in a fashion which was not expected by the IMF. 

Anisha Pandey

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