The IMF criticized El Salvador for its decision to make Bitcoin legal tender in a statement published about the country’s economy.
The International Monetary Fund (IMF) has issued a critical statement regarding El Salvador’s Bitcoin bonds. The global body published a report stating that the country should address any risks.
The statement was made during a virtual discussion and covered several aspects of using the new technology. It noted the economic developments, outlooks, and risks that were taking place in the country. Among them is that the El Salvadorean economy grew at a healthy pace last year, bucking a global trend.
However, it does believe that there are risks and issues. One of these is the fact that “Bitcoin’s risks should be addressed.” As it has in the past, the IMF believes that there are potential macro and microeconomic risks to Bitcoin’s status as a legal tender. The statement reads,
“While risks have not materialized due to the limited Bitcoin use so far—as suggested by survey and remittances data—its use could grow given its legal tender status…underlying risks to financial integrity and stability, fiscal sustainability, and consumer protection persist…”
It also asks for greater transparency over the government’s transactions in Bitcoin and the financial situation of the Chivo wallet. This is to assess underlying fiscal contingencies and counterparty risks.
El Salvador also recently passed a bill that would allow Bitcoin bonds. This has also stoked the ire of the IMF, which has repeatedly shown exasperation over the country’s decisions.
IMF Has Criticized El Salvador for BTC Adoption Before
The IMF has criticized El Salvador’s decision to adopt BTC as a legal tender several times in the past. The authority has asked El Salvador to drop Bitcoin as a currency, though President Nayib Bukele has stuck to his guns.
The primary concerns are macroeconomic, financial, and legal issues. It has repeatedly expressed these concerns since 2021, but it has not made much of an impact. The Central African Republic also recently made Bitcoin legal tender, resulting in disapproval from the IMF.
Bitcoin Experiment Ups and Downs
El Salvador’s experiment with Bitcoin has been something of a hit-and-miss. Tourism in the country has shot up by 30% since it made Bitcoin legal, something that was expressly planned for by the government. However, Bitcoin’s volatility has also hit the country’s coffers hard.
The Finance Minister has said that the experiment is working, though others seem to disagree. Gauging the success of the wallet is difficult, given how little time has passed. Moody’s believes that there is enough concern El Salvador’s credit outlook has weakened.
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