The board of directors of the International Monetary Fund (IMF) has urged El Salvador to stop using bitcoin as legal tender, as it poses significant risks to financial stability.
The IMF’s warning to El Salvador to ditch bitcoin comes after the value of the virtual currency fell to its lowest level in six months this week, only to rebound slightly on Tuesday.
The first country to adopt bitcoin as legal tender
In September, El Salvador became the first nation to adopt bitcoin as legal tender after President Nayib Bukele won support for his controversial bitcoin bill. The country’s acceptance of bitcoin as a currency has been criticized by the IMF and the World Bank. Today, retailers operating in El Salvador, including McDonald’s, Starbucks and Pizza Hut, accept bitcoins, which consumers use with the country’s Chivo wallet.
“Since September 2021, the government has adopted bitcoin as legal tender. Adopting a cryptocurrency as legal tender, however, carries great risks to financial and market integrity, financial stability, and consumer protection. It can also create contingent liabilities,” warns the IMF board.
Nayib Bukele announced via Twitter Friday that El Salvador had capitalized on bitcoin’s fall by buying 410 bitcoins for $15 million, adding to its existing stockpile of more than 1,500 BTC, Coindesk notes.
Nayib Bukele against the IMF
The president mocked the IMF statement on Twitter with a Simpsons-themed meme containing the text: “I see you, IMF. It is very good “. Earlier, in response to bitcoin’s price crash, he had posted an image of himself in a McDonald’s employee uniform in an apparent nod to the joke that when cryptocurrency prices fall, traders have to find “real work,” like flipping hamburgers.
The IMF board also hailed the potential impact of the Chivo portfolio on financial inclusion. However, he adds that the country needs “strict regulation and oversight of the new Chivo and Bitcoin ecosystem.”
The IMF highlights the “great risks associated with the use of bitcoin on financial stability, financial integrity and consumer protection, as well as the associated contingent fiscal liabilities” and called on El Salvador to “reduce the scope of the law on bitcoin by removing the legal tender status of bitcoin”.
Source: ZDNet.com