The International Monetary Fund (IMF) recently urged El Salvadoran authorities to remove Bitcoin’s legal tender status. They called it a threat to market integrity, financial stability, and consumer protection.
Criticizing the Bitcoin Law
The IMF publicly revealed its warning in a website statement earlier today, after concluding its Article IV consultation with El Salvador on Monday. Despite noting the country’s speedy post-pandemic economic recovery, it still cited Bitcoin’s legal tender status as a “large risk” to the market that could create “contingent liabilities”.
This is hardly the first criticism the IMF has had for the nation regarding this approach. In July, the organization said that making Bitcoin a national currency is a “step too far, citing price volatility and a lack of incentive for its use.
“A crypto-asset might catch on as a vehicle for unbanked people to make payments, but not to store value,” they said at the time. “It would be immediately exchanged into real currency upon receipt.”
Their criticisms fell along similar lines in today’s statement. While recognizing El Salvador’s state-run Chivo E-wallet as a tool for financial inclusion, they were far more concerned with the Bitcoin ecosystem in which it takes part.
“They urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status,” reads the statement.
Furthermore, the IMF showed concerns over “risks” associated with El Salvador’s Bitcoin-backed bonds. El Salvador is already moving forwards with economic plans centered around these bonds, used to buy Bitcoin and invest in infrastructure.
President Immune to Criticism
Nayib Bukele – President of El Salvador – will likely disregard the IMF’s claims. He has historically done so with his critics over social media, including the Bank of England, whose “worry” he considers disingenuous.
Similarly, the president told Moody’s last week that he “DGAF” about their downgrading of El Salvador’s sovereign debt.
The IMF levied a similar criticism of the nation’s debt in today’s statement. They agreed on a “fiscal consolidation starting this year” to “put public debt on a firm downward trajectory.”