IMF Warns El Salvador Against Using Bitcoin as Legal Tender After ‘Bitcoin City’ Announcement

The International Monetary Fund (IMF) has warned El Salvador in opposition to utilizing bitcoin as authorized tender as a result of numerous dangers related to cryptocurrency. The warning got here someday after Salvadoran President Nayib Bukele introduced his plan to construct a “bitcoin metropolis” powered by a volcano and financed by bitcoin bonds.

IMF Says El Salvador Shouldn’t Use Bitcoin as Legal Tender

The International Monetary Fund (IMF) warned El Salvador on Monday that the nation mustn’t use bitcoin as authorized tender, citing numerous dangers related to the cryptocurrency.

El Salvador is the primary nation on the earth to undertake bitcoin as legal tender alongside the U.S. greenback which it has used for 20 years. The nation’s bitcoin legislation went into impact in September. Furthermore, El Salvador has purchased 1,120 BTC, in accordance with Salvadoran President Nayib Bukele.

The IMF frequently undertakes Article IV missions to member nations to seek the advice of with authorities officers earlier than they request to make use of its sources. The IMF defined that for El Salvador, “The adoption of bitcoin as authorized tender, the regulation and supervision of bitcoin providers suppliers, and e-wallet Chivo have been additionally mentioned.”

In its “Staff Concluding Statement of the 2021 Article IV Mission” for El Salvador, the IMF detailed:

Given bitcoin’s excessive value volatility, its use as a authorized tender entails important dangers to client safety, monetary integrity, and monetary stability. Its use additionally offers rise to fiscal contingent liabilities. Because of these dangers, bitcoin shouldn’t be used as a authorized tender.

The IMF proceeded to advocate “narrowing the scope of the bitcoin legislation” and urged El Salvador to strengthen “the regulation and supervision of the brand new cost ecosystem.”

The current assertion from the IMF got here someday after President Bukele introduced a plan to construct the world’s first bitcoin city powered by a volcano and financed by bitcoin bonds. He famous there wouldn’t be any taxes within the bitcoin metropolis apart from value-added tax (VAT).

“The plans to challenge sovereign bonds and use the proceeds to purchase bitcoin and fund infrastructure plans introduced on November 20, occurred after the technical work of the mission concluded, and weren’t mentioned with the authorities,” the IMF clarified.

Commenting on the IMF’s assertion, Bukele mentioned:

Although we clearly don’t agree on some issues, such because the adoption of bitcoin, the evaluation it makes of our nation is fascinating.

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