The International Monetary Fund (IMF) is urging El Salvador and President Nayib Bukele to drop having Bitcoin as an official legal tender in its country. According to the IMF directors in a recent statement, they emphasized: “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.”
This report was released after talks with the El Salvador government in which they urged officials to initially narrow the abilities of Bitcoin as a legal tender in the country. In 2021, the nation became the first in the world to adopt any form of cryptocurrency as legal tender, in addition to the U.S. dollar.
This move from the El Salvador government and President Nayib Bukele has been met with intense controversy. Many within El Salvador and abroad have concerns as to whether the current crypto infrastructure exists in the nation to be able to house it as legal tender. Others, including Bukele himself, point to the fact that having the country take a chance on crypto can eventually elevate the nation’s financial status once crypto is more widespread as a legal tender in the future.
The call from the IMF for El Salvador to drop Bitcoin as a legal tender has been building up for some time now as well. In November 2021, they shared a report from a regulator who was stating that the volatility of Bitcoin’s price did not make it a suitable legal tender at all, regardless of whether the infrastructure for it was in place or not. They also claimed that this volatility would be associated with other security risks.
This is significant news for El Salvador, because the country has been trying to acquire a $1.3 billion loan from the IMF. However, with this report, it appears this will not be happening anytime soon, which harms the overall state of El Salvador’s bitcoin venture.
