Bukele needs to eliminate bitcoin as legal tender, IMF says

Wednesday, January 26th 2022 - 09:39 UTC

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Bitcoin's possible impact on the country's status with the International Monetary Fund (IMF) has always been feared

The International Monetary Fund (IMF) has urged Salvadorean President Nayib Bukele to drop the use of bitcoin as legal tender in the country, on the grounds that there are “great risks associated” with this practice. Bukele officially adopted bitcoin last September.

From the very moment it was made official, bitcoin's possible impact on the country's status with the International Monetary Fund (IMF) was feared.

The IMF's board issued a statement Tuesday calling for El Salvador “to limit the scope of the bitcoin law by eliminating its status as legal tender,” it was announced. The global body explained “financial stability, financial integrity, and consumer protection,” were endangered but this practice and also warned there were “potential fiscal contingencies.”

“Some directors also expressed concern about the risks associated with the issuance of bonds backed by bitcoin,” the statement went on.

El Salvador became the first country in the world to officially use bitcoin on September 7, 2021, legalizing its use in all transactions along with the US dollar adopted two decades ago.

Before the IMF's executive board, made up of representatives of all member countries, including the United States, called for its elimination, the Fund's technical staff had warned against the use of bitcoin given its “high volatility”.

“Bitcoin should not be adopted as legal tender,” the IMF had said in November. The IMF's executive board Tuesday supported “promoting financial inclusion” in El Salvador, and recognized that digital wallets could advance in that direction.

Bitcoin was trading at around US$37,000 Tuesday, compared with a record high of US$67,734 hit in November.