The International Monetary Fund said on Friday that El Salvador should dissolve the $150 million trust fund it created after it made the cryptocurrency bitcoin legal tender and return any of those unused funds to its treasury.
The recommendation was part of the international lender’s report on El Salvador’s economy and went on to go ahead with its statement earlier this week urging El Salvador to abandon bitcoin as legal tender.
The purpose of the trust fund was to allow automatic conversion of bitcoin into US dollars – El Salvador’s other currency – to encourage those wary of adopting the highly volatile digital currency.
The IMF also recommended that people start using the digital wallet “Chivo” and eliminate the $30 offer as an incentive for increased regulation of digital wallets to protect consumers. It suggested that there could be benefits to using Chivo, but using only dollars, not bitcoin.
“The actual costs of implementing Chivo and implementing bitcoin legislation in the near term outweigh the potential benefits,” the report said.
Salvadoran President Nayib Bukele’s office did not immediately respond to a request for comment, but in recent days Bukele has rejected the IMF’s recommendations regarding bitcoin.
The IMF expressed concern over El Salvador’s growing risk of bitcoin volatility and urged greater transparency.
Government officials told the IMF that the launch of “Chivo” significantly increased financial inclusion, attracting millions of people who previously lacked bank accounts in the financial system. He also spoke of parallel tourism promotions targeted at bitcoin enthusiasts.
According to the report, the government is not required to reduce the scope of its bitcoin legislation, but the agreed regulation could be strengthened.
Bukele pushed for the adoption of bitcoin as legal tender alongside the US dollar. The Legislative Assembly of El Salvador made the country the first to do so in June, and bitcoin legislation came into force in September.
“In the report we emphasize that having a digital wallet, which allows people to create a digital medium of payment and keep their savings there, preferably in US dollars, is important for growth as well as the economy. But again, I’m insisting on the US dollar because the price of bitcoin in bitcoin is volatile,” Alina Carare, head of the IMF’s mission in El Salvador, said in a call to reporters on Friday. .
After nearly doubling in value at the end of last year, bitcoin has fallen. El Salvador and the IMF have been negotiating a $1.3 billion loan for months. Carare did not say whether the potential loan would be repaid if El Salvador continued to use bitcoin as legal tender.
When asked, Carare said, “We continue to have a strong engagement with the government of El Salvador.”
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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