Members of the International Monetary Fund’s executive committee are urging lawmakers in El Salvador to stop recognizing Bitcoin as a legal tender.
IMF reported on Tuesday that while digital payments could increase financial inclusion in the Central American country, the use of Bitcoin (BTC) as a legal tender posed “major risks” to financial stability, financial integrity and consumer protection. The directors of the executive committee called on the Salvadoran authorities to “narrow the scope of the Bitcoin law by removing the status of legal tender Bitcoin”, and also expressed concern about the possible risks of issuing Bitcoin-backed bonds.
The officials’ recommendation came after the conclusion of the Article IV consultation in El Salvador. According to the IMF, there is a group of economists during such a consultation visits “to assess economic and financial developments and discuss the country’s economic and financial policies with government and central bank officials.”
Ahead of the introduction of the Salvadoran Bitcoin Act in September 201, IMF officials warned that some of the consequences of a country adopting the BTC as its national currency could be “terrible”, including the risk of domestic prices becoming highly volatile and using assets contrary to to prevent money laundering and combat terrorist financing. The International Monetary Fund has already issued statements to small countries considering the introduction of cryptocurrencies, arguing that this would “increase the risk to macroeconomic and financial stability and financial integrity”.
Since the Bitcoin law went into effect in September, El Salvador President Nayib Bukele has posted several Twitter purchases of BTC totaling 1,801 BTC with his Twitter account – at the time of the announcement worth about $ 67 million. The last purchase of 410 BTC happened when the price of a crypto asset fell below $ 37,000 for the first time since July 2021.
No, I was wrong, I didn’t miss it.
Salvador just bought a 410 #bitcoin for only $ 15 million
Some guys sell really cheap ♂️ https://t.co/vEUEzp5UdU
– Nayib Bukele (@nayibbukele) January 21, 2022
January 14 that El Salvador’s recognition of BTC as a legal tender could affect the country’s credit prospects, according to Moody’s Investors Service. Analyst Jaime Reusche reportedly said Bitcoin “definitely contributes to the risk portfolio” of a country struggling with liquidity problems.
According to Markets, the price of bitcoin at the time of publication was $ 36,550, and has fallen by more than 12% in the last seven days. The crypto asset fell briefly to $ 33,000 on Jan. 24 and then returned to $ 36,000.