International Monetary Fund is urging El Salvador to declare Bitcoin an illegal tender
The International Monetary Fund has urged El Salvador to stop using Bitcoin as its legal tender. El Salvador became the world’s first country to adopt Bitcoin in September of 2021. It launched a national virtual wallet in order to make this happen.
The Executive Board of the International Monetary Policy Fund (IMF) recommended that El Salvador stop considering Bitcoin as a form of legal tender. The report was published after talking with El Salvador about their use for cryptocurrency.
The IMF released a statement saying:
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.
El Salvador was the first country in the world to adopt Bitcoin as a valid form of currency, alongside the US dollar. El Salvador has also been purchasing Bitcoin since December of last year when it started trading for around $50,000 per token. On Friday, El Salvador bought 410 Bitcoins with that price at around $6200 per token. Bitcoin has fallen in value in recent days, but it has also risen slightly. As of this afternoon (Tuesday) Bitcoin is worth $36,671, having risen over the weekend when it was worth below $3500 – about 50%.
This is a new development as the IMF warns directors about possible risks with issuing bitcoin-backed bonds. The President’s plan is to issue $1 billion through Blockstream and Bitcoin Bond which they see as an investment opportunity.
Meanwhile, El Salvador is joining many other countries by building a virtual wallet called Chivo. Chivo is a no-fee transaction and also offers quick cross-border payments, making it easier for citizens to purchase goods from the US.
Likewise, IMF directors agreed that the Chivo e-wallet could facilitate digital means of payment. At the same time, they emphasized the need for strict regulatory oversight.