El Salvador should not use bitcoin as a legal tender because of the economic and consumer risk it poses, International Monetary Fund (IMF) employees wrote in a concluding statement related to a mission in the Central American country.
“Given Bitcoin’s high price volatility, its use as a legal tender involves a significant risk to consumer protection, financial integrity and financial stability,” the IMF statement said on 22 November. “Its use also gives rise to fiscal contingent liabilities. Because of these risks, bitcoin should not be used as a legal tender.”
IMF staff say that although they welcome financial inclusion and growth efforts, El Salvador should address risks associated with the use of bitcoin as a legal tender, its “new payment ecosystem”[ads1]; and bitcoin trading. The country made Bitcoin a legal tender next to the US dollar on September 7.
The IMF makes several recommendations for El Salvador in the statement, including limiting the scope of the bitcoin law. It also proposes to strengthen regulation and supervision of the payment system in order to protect consumers, protect against money laundering and terrorist financing (AML / CFT) and manage risk.
“As with other e-wallets, Billy Goat “It should be required to fully secure customers’ funds, both in US dollars and Bitcoin, by separating and refining reserves,” the IMF statement said.
In addition, the IMF recommends that El Salvador consider closing the $ 150 million trust fund it uses to facilitate the conversion of Bitcoin into US dollars.
«Measures to limit tax-related liabilities, such as winding up the fund or withdrawing public grants to Billy Goat, should also be considered immediately, “recommends the IMF. In addition, it states that the country’s banking regulations should include security measures focused on exposure to bitcoin.
El Salvador’s President Nayib Bukele addressed the statement on Twitter shortly after it was published.
“The IMF has just published its technical evaluation of El Salvador for the year 2021,” Bukele wrote in Spanish. “And although we obviously do not agree on anything, such as the adoption of Bitcoin, their analysis of our country is interesting.” He then shared a series of messages with highlighted passages pointing to more favorable statements.
The IMF and El Salvador have been engaged in talks on a $ 1.3 billion loan deal, Bloomberg reported. These concluding statements include employees’ preliminary findings after completing an official assignment to a country.
The IMF did not evaluate President Bukele’s recent announcement that El Salvador would issue so-called bitcoin bonds, as announced after the mission ended.