IMF urges El Salvador to drop Bitcoin as the official currency


The International Monetary Fund (IMF) has requested El Salvador to remove the status of Bitcoin as the national fiat currency because of a range of risks, including financial stability.

The IMF’s warning about Central American countries using Bitcoin as the official currency alongside the US dollar is Review notes Following the so-called Article 4 consultation mission, which evaluated the financial development of El Salvador.

While the IMF team praises El Salvador’s efforts to promote financial inclusion, including the deployment of the Chivo e-wallet, which is part of the country’s crypto ecosystem, both Chivo and Bitcoin’s “strict regulations and” He emphasized the need for “surveillance.”

The IMF’s board of directors called on the legislators of El Salvador to remove Bitcoin’s status as fiat currency, saying, “A bit on financial stability, financial integrity, consumer protection, and related financial contingent debt. He emphasized that there are significant risks associated with the use of coins. “

The IMF’s note received a critical welcome by President Nayib Bukele of El Salvador. Negative meme On Twitter, “IMF, see you. Very nice.”

Bukele, a proponent of Bitcoin, led the adoption of El Salvador as fiat currency. In September 2021, El Salvador began using Bitcoin as fiat currency for the first time in the world and launched the Chivoe wallet preloaded with Bitcoin worth $ 30 to encourage adoption.

The IMF has stated that it is reluctant to hold El Salvador’s Bitcoin fiat currency in the months prior to its adoption, in line with recent Article 4 recommendations.

“The adoption of Bitcoin as fiat currency raises many macroeconomic, financial, and legal issues that require very careful analysis. Therefore, we are closely tracking progress. We will continue to consult with the authorities, “said Gerry Rice, director of the IMF’s Communications Department. June 2021..

Most recently, on July 29th Blog post The IMF has released two policy documents on digital currencies, acknowledging the “immeasurable opportunities” for digital form of money, including the ability to boost cheaper transactions and financial inclusion. Nevertheless, authorities warn of many risks, including their impact on domestic economic and financial stability, with the most widespread impact on the stability of the international monetary system.

“The least stable of the less qualified lots are crypto assets (such as Bitcoin) that are unsubstantiated and affected by the whims of market power,” the IMF warned in a post. ..

Overall, the IMF team praised El Salvador’s leadership in “timely and effective” pandemic management in a Section 4 assessment. After shrinking 7.6% in 2020, El Salvador’s GDP is ready to grow 10% overall in 2021 and 3.2% in 2022.

However, international organizations have warned that the public debt of countries ready to reach 96% of GDP by 2026 is on an unsustainable path.

“Financial vulnerabilities due to the stock-to-GDP ratio of large public debt have expanded during the pandemic and need to be addressed promptly,” the IMF board said in a memo. Encouraged the adoption of revenue and expenditure measures that would bring about. “I’m on a solid downward trajectory.”

Tom Ojimek

follow

Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communication, and adult education. The best writing advice he has ever heard is from Roy Peter Clarke.