IMF urges El Salvador to abandon Bitcoin

The International Monetary Fund (IMF) executive board issued a statement on Tuesday urging El Salvador to remove Bitcoin’s legal tender status in the country, citing concerns that the digital currency could pose risks to financial stability and markets.

As previously reported by BitPush, El Salvador’s President Nayib Bukele announced plans to adopt Bitcoin as legal tender in September after introducing a Bitcoin bill last June. The bill was quickly approved by lawmakers and took effect a few months later.

The International Monetary Fund opposed the move from the outset and said today that the Central American country’s adoption of Bitcoin as legal tender “poses significant risks to financial and market integrity, financial stability, and consumer protection.”

The IMF directors “urged authorities to narrow the scope of Bitcoin laws by removing its legal tender status,” the statement said.

Some directors also expressed concerns about the idea of ​​issuing bitcoin-backed loans, an initiative that Bukele proposed last year in partnership with Blockstream. However, the directors did not specify which aspects of the bitcoin bonds they considered risky.

El Salvador is the first country in the world to adopt Bitcoin as legal tender, giving it legal tender status in a country that relies on remittances and where a large portion of the population lacks access to traditional banking. Despite Bitcoin’s potential to bring equal financial opportunities and improve the remittance experience, the Central American country is now caught between its groundbreaking initiative and its funding needs as the International Monetary Fund attempts to impose conditions on granting loans.

“Directors agreed on the importance of promoting financial inclusion and noted that digital payment methods – such as the Chivo e-wallet – can play this role,” the IMF report concluded. “However, they stressed the need for strict regulation of the new Chivo and Bitcoin ecosystems.”