The International Monetary Fund (IMF) has called on El Salvador to limit the scope of its Bitcoin law as part of ongoing discussions regarding the country's economic policies.
The IMF's recommendation comes as the organization expresses concern over the potential risks associated with Bitcoin’s widespread use as legal tender, particularly its volatility and lack of regulatory oversight.
El Salvador, led by President Nayib Bukele, became the first country in the world to adopt Bitcoin as an official currency in September 2021, alongside the U.S. dollar. The government introduced the “Chivo” digital wallet to facilitate Bitcoin transactions, offering citizens $30 worth of Bitcoin upon sign-up to encourage adoption. Additionally, the government has ambitious plans to create a "Bitcoin City," powered by volcanic energy, to support Bitcoin mining and to issue "Bitcoin Bonds" aimed at attracting global investment.
However, the IMF has voiced its concerns about the country's reliance on Bitcoin, warning that its extreme price fluctuations could destabilize El Salvador's financial system. The IMF is pushing for more stringent regulations to protect consumers and reduce the risks associated with cryptocurrency use. In January 2022, the IMF urged El Salvador to revoke Bitcoin's legal tender status, emphasizing the significant macroeconomic, financial, and legal challenges posed by its adoption.
Despite the IMF's warnings, El Salvador remains committed to its Bitcoin strategy, with President Bukele arguing that the adoption of Bitcoin has attracted foreign investment and boosted tourism in the country. While the use of Bitcoin in everyday transactions has not yet met the government’s expectations, it remains a significant part of El Salvador’s economic agenda.
The IMF’s concerns have emerged as the country seeks financial assistance to address economic challenges exacerbated by its embrace of Bitcoin. These discussions highlight the ongoing debate over the role of cryptocurrencies in national economies, with the IMF emphasizing the need to maintain financial stability while exploring new digital financial technologies.
Follow the latest news on Google News
