threats to financial stability
IMF wants El Salvador to abolish bitcoin again
01/26/2022, 1:15 p.m
El Salvador is the first country ever to introduce Bitcoin as an official means of payment. Since then, the government has been investing heavily in cryptocurrency. Critics like the IMF have been warning of high exchange rate fluctuations for a long time and are even calling for the Central American state to abolish it.
The International Monetary Fund (IMF) has asked El Salvador to revoke the legal tender status of the digital currency Bitcoin. The Central American state was the first country in the world to give the cryptocurrency this status in September.
In a statement, the IMF Board of Directors stressed that there are major risks associated with the use of Bitcoin – for financial stability, financial integrity and consumer protection, as well as the associated tax contingencies.
With digital forms of payment such as the Chivo e-wallet introduced in the Central American country, financial inclusion could be promoted, it said. The new economic environment around Chivo and Bitcoin must be strictly regulated and monitored. The occasion was talks on the economic situation, which the Washington-based UN special organization regularly conducts with member states.
El Salvador has been negotiating with the IMF for a loan package worth 1.3 billion US dollars (around 1.15 billion euros) for some time. According to El Salvador’s bitcoin law, any merchant technically able to do so must accept the cryptocurrency. Taxes can also be paid in it. Controversial President Nayib Bukele also announced the construction of a “Bitcoin City” in November.
Bitcoin is the most well-known digital currency. It is not controlled by a central bank, but created by a decentralized, energy-intensive computer process. Bitcoin is considered an object of speculation and is subject to violent price fluctuations. The price of a bitcoin was just under $37,000 on Tuesday – in November it had reached a high of around 68,000. According to estimates based on information from Bukele on Twitter, El Salvador has now bought around 1800 Bitcoin.