Key Takeaways
- The International Monetary Fund has urged El Salvador to discontinue Bitcoin’s status as legal tender.
- Directors at the IMF expressed concerns around financial stability, integrity, consumer protection, and other risks.
- El Salvador first adopted Bitcoin in September 2021 and has lost approximately 30% on its initial investment.
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Directors at the International Monetary Fund have recommended that El Salvador drop Bitcoin’s status as legal tender.
IMF Advises Against Bitcoin as Legal Tender
According to a press release published by the IMF today, the IMF’s directors “urged [El Salvador] to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.”
Those directors expressed concerns around financial stability, integrity, and consumer protection and suggested a need for regulation. More specifically, they noted that El Salvador’s Bitcoin-backed bonds, which were announced this winter, carry risks.
The IMF directors did, however, acknowledge that El Salvador’s Chivo e-wallet could help with financial inclusion by offering financial services to those that have little access to existing resources.
These statements were made as part of an Article IV consultation—a practice in which an economic team visits a country, assesses its economy, and reports back to IMF’s executive board.
El Salvador Has Faced Bitcoin Criticism Before
The IMF previously suggested that Bitcoin should not be used as legal tender in November 2021, shortly after the country adopted it.
The country also saw early controversy around the possibility that it would force certain businesses to accept Bitcoin, though it appears that the country did not force anyone do to so.
The country and its president, Nayib Bukele, have also been criticized for alleged surveillance tactics in recent weeks. Though these tactics were aimed at journalists rather than Bitcoin users, the allegations drew criticism from the crypto community.
El Salvador has purchased approximately 1,801 BTC to date, an amount currently valued at $65.3 million. That value represents losses of approximately 30% since purchase.
The country nevertheless continues to pursue new Bitcoin applications: it has opened volcano-powered Bitcoin mining facilities and is planning a Bitcoin City.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.
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