IMF warns El Salvador about risks of bitcoin adoption

U.S.A.IMF warns El Salvador about risks of bitcoin adoption

The IMF logo is seen outside its headquarters in Washington

The International Monetary Fund (IMF) agreed this Monday that El Salvador should not adopt bitcoin as legal tender.Despite the fact that the risks involved are faced by the President NB Bukele also announced the construction of the world‘s first bitcoin city.

The IMF, after a periodic assessment 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.

Even then, The entity recognized that its use as legal tender implies “great risks to consumer protection, the integrity of the financial system and financial stability” given the high volatility of bitcoin.

Furthermore, he cautioned that “its use may also result in financial contingencies” and concluded that “Bitcoin should not be adopted as legal tender.”

risk faced, The IMF recommended that El Salvador “limit the scope of bitcoin legislation” which made the cryptocurrency legal tender in the Salvadoran economy since last September 7.

The fund also believes that “Chivo, a government-controlled cryptocurrency wallet, should be obliged to insure user funds entirely in dollars and bitcoin, through segregation 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.

President Nayib Bukele
President Nayib Bukele

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

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Bukele has been criticized by the opposition for making bitcoin legal tender in the Salvadoran economy, which according to the IMF will grow between 10% in 2021 and 3.2% by 2022.

After learning of the IMF’s report, President Bukele called the country’s analysis “interesting” on his Twitter account. “Obviously, we don’t agree on some things, such as the (risky) adoption of bitcoin,” he said.

Bukele will attend the Bitcoin 2022 conference, which will take place in Miami, as it took place this Monday.

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

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

Bukele announced last June that El Salvador would become the first country to legalize bitcoin as a currency of exchange, and three months later the Legislative Assembly approved bitcoin legislation.

El Salvador thus became a world laboratory of cryptocurrencies with the adoption of bitcoin as legal tender and over the months the ambiguity in the purchase of this cryptoactive with public money and the dark side of the identity theft measure. EFE

(With information from AFP and EFE)

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