Thursday, December 2

IMF warns El Salvador: Do not use Bitcoin as currency

The International Monetary Fund (IMF) issued a brief report on El Salvador this Monday (22) after an official visit by IMF officials. The note was issued a few days after the conclusion of the Labitconf conference, which, among other things, discussed raising a billion dollars for the construction of Bitcoin City.

Among the issues addressed by the report is the way in which El Salvador dealt with the pandemic, as well as a warning for the country to abandon Bitcoin as a legal currency due to its high volatility and, according to the IMF, it is necessary to protect the citizen.

Among criticisms and praise, the fact is that the world is keeping an eye on how El Salvador is treating its economy, and may serve as an example to other countries that are considering adopting Bitcoin as their legal currency.

Quit Bitcoin, IMF Alert

While claiming that efforts to improve inclusion and financial growth are welcome, the IMF warned of Bitcoin’s risks for Salvadoran citizens. Alleging that the introduction of the BTC as a legal currency in the country brings risks to citizens, due to its high volatility.

“Given the high volatility of Bitcoin’s price, its use as a legal tender involves significant risks in relation to consumer protection, its financial integrity and financial stability. Its use also gives rise to contingent tax liabilities. Because of these risks, Bitcoin should not be used as legal tender.”, points out the IMF report

The IMF also highlighted the importance that the Chivo wallet must be required to guarantee and protect citizens’ funds, both in dollar and bitcoin. As well as maintaining practices against money laundering and terrorist financing. Despite this, the report points out that the portfolio has been a great help for financial inclusion.

Nayib Bukele, president of El Salvador, was happy with the IMF report, although he makes it clear that there are still differences of thought. Mainly in relation to the adoption of BTC as the legal currency in the country.

“The International Monetary Fund (IMF) has just published its technical assessment of El Salvador for the year 2021. And although we obviously don’t agree on some things, like adopting #Bitcoin, the analysis made of our country, El Salvador, is interesting”

Report also praised the Salvadoran government

Nayib Bukele also countered opposition criticism using the same IMF report, which was also satisfied with other points, particularly in relation to the fight against Covid-19.

“It’s interesting that it was the IMF that destroyed all the opposition’s arguments: Excellent pandemic treatment. Transparency in the use of funds [em combate a] #COVID19. Strong REDUCTION of CRIME. Economy will grow 10% this year.”

Finally, the report also addressed the issuance of Bitcoin-backed bonds for the construction of Bitcoin City. According to the IMF, this requires a deeper and more careful analysis of the implications and risks related to financial stability. Remembering that this project was announced this weekend.

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