The IMF wants El Salvador to abandon the incredibly risky cryptocurrency Bitcoin as legal currency and severely regulate the digital wallets that the government has pushed across the country.
“We asked the authorities to narrow the extent of the Bitcoin law by eliminating Bitcoin’s legal currency status,” the board of the global lender said “In a statement released Tuesday, the IMF stated.
“However, adopting a cryptocurrency as legal cash carries significant risks to economic and financial integrity, financial stability, and consumer protection,” according to the report “According to the IMF statement.
President Nayib Bukele has been a driving force behind the adoption of Bitcoin as legal currency alongside the US dollar. In June, El Salvador’s Legislative Assembly became the first country to do so.
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Bitcoin has plummeted in value since late last year and was somewhat lower on Tuesday than it was when the House voted on June 9. In September, the bitcoin law came into effect.
There were concerns from the start that digital money designed to be independent of governments would encourage criminal activities. Bukele marketed adoption as a solution for thousands of Salvadorans to avoid paying fund transfer fees when sending money home from relatives living abroad.
El Salvador’s law required all establishments to accept Bitcoin as payment if they have the technological capability. The rollout was a little shaky at first, but it appears to have eased out now.
Bukele became a cryptocurrency promoter’s darling, and he’s subsequently talked of constructing a Bitcoin city and issuing Bitcoin-backed bonds, which some IMF directors are concerned about.
Bukele’s office said it didn’t have a response to the IMF’s announcement right away.
El Salvador’s Treasury Minister Alejandro Zelaya, on the other hand, cited the IMF’s agreement that increasing financial inclusion is critical and that an e-wallet could help, adding via Twitter: “It appears to work for digital payments, but you mustn’t do it.” No one is safe from the future. #Bitcoin.”