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El Salvador should not use Bitcoin as legal tender, says IMF

  • In a recent statement published by the International Monetary Fund, Bitcoin's price volatility poses significant risks to El Salvador's economy. 
  • The IMF says using Bitcoin as legal tender negatively impacts consumer protection, financial integrity, and financial stability in El Salvador. 
  • The IMF recommends that El Salvador narrow the scope of the Bitcoin law for its growth and financial inclusion. 

The IMF has warned El Salvador against the negative impact of Bitcoin adoption on its economy. The international organization suggests that El Salvador bolster regulation to protect its consumers. 

IMF asks El Salvador to close its $150 million funds that facilitates Bitcoin to USD conversion

The International Monetary Fund (IMF) has recommended that El Salvador stop using Bitcoin as legal tender due to financial and consumer risks. 

The IMF's concluding statement reads,

Given Bitcoin's high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability. Its use also gives rise to fiscal contingent liabilities. Because of those risks, bitcoin should not be used as a legal tender.

El Salvador has welcomed financial inclusion through Bitcoin adoption; however, the IMF believes that the country should narrow the scope of Bitcoin law. Bolstering crypto regulation and increasing oversight of payment systems could help in mitigating associated risks. 

Additionally, the organization recommends that El Salvador close its $150 million trust fund that facilitates Bitcoin to USD conversion. The IMF believes that prompt measures could safeguard users with exposure to Bitcoin

Nayib Bukele, President of El Salvador, reacted to IMF's recommendation, 

The IMF just published its technical evaluation of El Salvador for the year 2021. And although obviously, we don't agree with some things, like the adoption of Bitcoin, their analysis of our country is interesting.

FXStreet analysts have evaluated the Bitcoin price trend and predicted that BTC is heading south, collecting liquidity. Analysts have set a target of $53,000 for BTC price. 

Author

Ekta Mourya

Ekta Mourya

FXStreet

Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.

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