IMF tells El Salvador to renege Bitcoin’s status as legal tender

IMF directors want to limit the scope of Bitcoin Law to remove fiat status from digital assets

On September 7, last year, El Salvador, led by Bitcoin’s optimism president Nayib Bukele, officially adopted the king’s cryptocurrency, Bitcoin, as fiat currency. Several financial institutions, including the World Bank and the International Monetary Fund (IMF), have advised against this move, but El Salvador has made progress.

The IMF Board once again urged the State to abandon its position on this issue. Latin American countries are discussing over $ 1.3 billion in loans with financial institutions. As part of the talks, the IMF wants to change the status of domestic Bitcoin fiat currencies.

The IMF has long opposed the idea of ​​using Bitcoin as fiat currency, and the report released yesterday was in line with previous views of financial institutions.

Bitcoin adoption threatens El Salvador’s financial stability

Keeping in mind that the country’s public debt is while the economy is declining, the IMF has warned that Bitcoin’s fiat currency is not suitable for its recovery. Instead, its use only poses a financial stability risk and harms the integrity of the financial system.

“They emphasized that there are significant risks associated with the use of Bitcoin for financial stability, financial integrity, consumer protection, and related financial contingent liabilities.” I read the report.

The report also detailed that some directors of the board want El Salvador to abandon Bitcoin’s position on the risks posed by Bitcoin-backed bonds. IMF directors also said that digital payment systems will strengthen financial inclusion, but such systems (Chivo e-wallet) will be’Strict regulation and oversight.

This is a concern as the wallet has had considerable problems since its launch. Last month, users complained about fraudulent transactions leading to the loss of Bitcoin from their wallets.

The IMF has opposed this idea from the beginning

The IMF’s position on the idea of ​​using Bitcoin as fiat currency in El Salvador dates back to June last year when President Bukele first announced the idea at the Bitcoin Miami Conference 2021. There was enormous potential risk and a proper regulatory framework was needed to succeed.

Financial institutions also said in November that, despite El Salvador’s efforts to strengthen financial inclusion, El Salvador needs to redefine the scope of Bitcoin Law and strengthen oversight of established economic structures. Said.

As part of that, the World Bank refused to help El Salvador implement the integration of Bitcoin as fiat currency. International financial institutions cited transparency and environmental issues as reasons why they could not support the national plan.

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