IMF recommends El Salvador not use bitcoin as legal tender
Monday’s International Monetary Fund (IMF), stated that El Salvador shouldn’t use bitcoin as legal tender, due to the risks associated with it.
Due to bitcoin’s volatility in price, the legal tender’s use poses significant risks for consumer protection, financial integrity and financial stability. In its staff conclusion statement to the 2021 Article IV mission in El Salvador, the IMF stated that it also creates fiscal contingent liabilities.
Article IV missions are conducted by the IMF to member countries in order to consult with officials of government before they request IMF resources.
El Salvador was the first country to legalize bitcoin in September.
“Because these risks, bitcoin shouldn’t be used as a legal tender.” The IMF recommended that staff narrow the scope of bitcoin law and encourages the strengthening of regulation and supervision of new payment ecosystems.
President Nayib Bukele has praised the potential of bitcoin to allow Salvadorans to send money home. However, he also stated that the U.S. Dollar will continue to be legal tender. It will facilitate financial inclusion, investment, and tourism, he stated.
Bukele stated that even though we don’t agree on #Bitcoin’s adoption, the IMF’s analysis of his country was interesting.
The IMF estimated that El Salvador’s economy would grow by 10% in 2021, and 3.2% in 2022. It also stated that it expected El Salvador’s public debt will reach 85% by 2021.