The International Monetary Fund (IMF) has warned El Salvador – the only country to have adopted bitcoin as legal tender – of the risks it faces should its dependence on the cryptocurrency deepen.
Bitcoin “continues to pose underlying risks to financial integrity and stability, fiscal sustainability and consumer protectionEl Salvadorans, write IMF experts in a report released on Friday. The President of El Salvador, Nayib Bukele, decided in September 2021 to make El Salvador the first country to adopt bitcoin as its official currency, in addition to the US dollar.
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The IMF and World Bank warned at the time that this could make the country more vulnerable to money laundering and other illicit activities that could destabilize the economy. “Although the risks have not materialized due to the limited use of bitcoin so far“, this use could be amplified, they note, in particular because of “new legislative reforms to encourage the use of crypto assets“.
“Given the legal risks, the fiscal fragility and the mainly speculative nature of the crypto markets, the authorities (Salvadoran, editor’s note) should abandon their plans to expand government exposure to bitcoinrecommends the IMF, which calls on the government tomore transparencyabout his bitcoin transactions and the financial health of his cryptocurrency portfolio.
After a record high of $67,734 in November 2021, bitcoin’s value has fallen sharply and now stands at nearly $22,000. El Salvador’s GDP growth wasrobustin 2022, to 2.8%, says the report, which warns that an economic slowdown in the United States could affect this small Central American country.