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The IMF warned El Salvador about the risks of adopting bitcoin


The IMF logo is seen outside its headquarters in Washington

The International Monetary Fund (IMF) considered this Monday that El Salvador should not adopt bitcoin as legal tenderl in the face of the risks involved, despite the fact that the president Nayib Bukele even announced the construction of the world’s first bitcoin city.

The IMF, after a periodic evaluation of the country’s finances known as Article IV, recognized the efforts of the Salvadoran government to promote financial inclusion and economic growth through the use of crypto technologies.

Nevertheless, the entity considered that “given the high volatility of bitcoin” its use as legal tender “implies great risks for consumer protection, the integrity of the financial system and financial stability”.

In addition, he warned that “its use can also cause fiscal contingencies” and concluded that “bitcoin should not be adopted as legal tender.”

Faced with risk, The IMF recommended that El Salvador “limit the scope of the Bitcoin Law” that gave legal tender to the cryptocurrency in the Salvadoran economy since last September 7.

The fund also considers that “Chivo, the government-controlled cryptocurrency wallet, should be obliged to“ fully insure user funds, in dollars and in bitcoins, through the separation and protection of reserve assets. ”.

Last Saturday, during the closing of Labitconf, an annual forum that brings together Bitcoiners from around the world, the president Bukele announced that the world’s first Bitcoin city will be built in eastern El Salvador.

The IMF warned El Salvador about the risks of adopting bitcoin
President Nayib Bukele

Using geothermal energy from volcanoes, Bitcoin City would be built in the city of Conchagua, near the volcano of the same name and the Gulf of Fonseca in the Pacific Ocean.

Bukele has been criticized by the opposition for having given legal tender to bitcoin in the Salvadoran economy, which according to the IMF this 2021 would grow by 10% and 3.2% by 2022.

After learning about the IMF report, President Bukele described the analysis on the country as “interesting” on his Twitter account. “Obviously we do not agree on some things, such as the (risky) adoption of bitcoin,” he added.

Bukele, will participate in the Bitcóin 2022 Conference, which will take place in Miami, as it transpired this Monday.

“We are proud to announce the President of El Salvador @nayibbukele as a speaker at # Bitcoin2022!”, points to a message on Twitter posted by the event organizers and retweeted by the president.

It is added that “in Bitcoin 2021, Bukele announced plans to make #bitcoin legal tender in El Salvador through a video and will join the list of speakers for 2022 in person. See you in Miami! ”.

Bukele announced last June that El Salvador would become the first country to give legal tender to bitcoin as an exchange currency and three months later the Legislative Assembly approved the Bitcoin Law.

El Salvador thus became a world laboratory of cryptocurrencies with the adoption of bitcoin as legal tender and in these months the opacity in the purchase of this cryptoactive with public funds and the identity theft have become the dark side of the measure. EFE

(With information from AFP and EFE)

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