The International Monetary Fund wants El Salvador to abandon the highly volatile cryptocurrency bitcoin as legal tender and strictly regulate the electronic wallet that the government has pushed for nationwide adoption.
In a statement on Tuesday, the IMF said in a statement on Tuesday, the global lender’s board “urges authorities to reduce the scope of bitcoin law by removing bitcoin’s legal tender status.”
“However, the adoption of cryptocurrency as legal tender poses major risks to financial and market integrity, financial stability and consumer protection,” the IMF statement said.
President Nayib Bukele pushed for the adoption of bitcoin as legal tender alongside the US dollar. The Legislative Assembly of El Salvador became the first country to do so in June.
After nearly doubling in value late last year, bitcoin has fallen and was down slightly on Tuesday, when Congress voted on June 9. The bitcoin law came into force in September.
From the start there was concern that digital currency created to be out of control of governments would attract criminal activity. When relatives living outside the country sent home remittances, Bukele promoted adoption for thousands of Salvadorians to avoid money transfer fees.
El Salvador’s law called on all businesses – with the technical capability – to accept bitcoin as a form of payment. The rollout was messy, but it seems to have gone smoothly.
Bukele became a darling of cryptocurrency promoters and has since talked about building a bitcoin city and issuing bitcoin-backed bonds, something that and some IMF directors expressed concern.
Bukele’s office said it did not immediately comment on the IMF’s statement.
El Salvador’s Treasury Minister Alejandro Zelaya, however, noted the IMF’s agreement was important to promote financial inclusion and that an e-wallet could help, to which he added via Twitter: “It works for financial inclusion.” Appears to be, but you shouldn’t do it. The future waits for no one. #Bitcoin.”
The IMF commended Bukele’s government for its management of the COVID-19 pandemic. The country is currently experiencing a surge in infections, but it was aggressive in vaccinating the population and had a relatively low mortality rate.
It also noted that the economy was projected to grow 10% in 2021 after contracting 7.9% a year earlier.
The board saw other problems on the horizon, however, if the government does not tighten its spending.
“The persistent fiscal deficit and high debt servicing are leading to larger and increasing financing requirements,” the statement said. “Under current policies, the public debt is expected to grow on an unsustainable path to approximately 96 percent of GDP in 2026.”
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,