The International Monetary Fund (or IMF), which monitors the global economic system and distributes loans and aid to its paying member countries, has reinforced its calls for El Salvador to abandon bitcoin (BTC) as legal tender. .
As part of regular meetings between the IMF and individual member countries, the organization collects economic data and reports it to the committee, which in turn discusses problem areas and possible solutions with the country’s government.
And the IMF believes bitcoin is a problem for El Salvador.
According to reports from the international organization at the conclusion of the consultation, the economy of the Central American country is decreasing while its public debt is expanding.
It argues that using bitcoin as a national currency (since September 2021) risks financial recovery: “The adoption of a cryptocurrency as a legal tender involves major risks to financial and market integrity, financial stability and consumer protection. It can also create contingency obligations.”
The IMF objection dates back to June 2021, shortly after Nayib Bukele, President of El Salvador, announced during the Bitcoin Conference in Miami that he was proposing a law that would require citizens and businesses to accept bitcoin as payment unless there is no access. enough internet for that.
The country had used the US dollar as its currency since 2001.
At the time, an IMF spokesperson hinted that the country was not ready: “Crypto assets can present significant risks and effective regulatory measures are very important in dealing with them.”
However, the Legislative Assembly quickly passed the bill, and in September, El Salvador became the first country in the world to use bitcoin and its official currency.
In November, at the start of the consultation process, the IMF again asked El Salvador to drop bitcoin as its currency, citing its high price volatility.
This came into play when Bukele added around 1,800 BTC to the country’s treasury, even though he bought another 410 BTC when the market crashed this week. Between September and now, the price of bitcoin has soared from $50,000 to a record $69,000 and plummeted below 40,000.
On January 12, the Bloomberg projected that El Salvador had $12 million in unrealized losses.
IMF and cryptocurrencies
The International Monetary Fund (IMF) devoted an entire chapter to cryptocurrencies in the October issue of “Global Financial Stability Report“.
The entity praises innovations that cryptocurrencies, tokens and stablecoins have brought, but makes a series of warnings for what it believes are systemic risks. In the end, it gives 8 pieces of advice for countries to navigate the crypto universe.
Technological innovations in cryptocurrencies, says the IMF, are enabling a new era in payment methods: “cheaper, faster, more accessible and allow for easier flow between countries”, defines the Fund.
“DeFi (Decentralized Finance) can become a platform for more innovation, inclusion and transparency in financial services”, points out the body.
Click here to read the 8 IMF advice on cryptocurrencies.
*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co.