El Salvador: IMF says no to bitcoin as a means of payment

The International Monetary Fund (IMF) is urging El Salvador to revoke Bitcoin’s legal tender status, it said in a statement. According to Reuters, the IMF fears huge problems with the stability of the financial market in the crisis-ravaged country.

Since the first reports that the Central American state of El Salvador had even considered adopting Bitcoin as legal tender, there has been massive criticism of the project. However, this did not bother the head of state and so in mid-2021 El Salvador became the first country in the world to introduce the cryptocurrency Bitcoin as legal tender – next to the US dollar, which has been official currency for years. Report them now Reuters news agencythat the International Monetary Fund has asked IMF El Salvador to reverse these changes. Infographic Bitcoin, Ethereum & Co.: Three Trillion Dollars in Cryptocurrency

IMF urges El Salvador to restore changes

IMF executives stressed that “major risks to financial stability, financial integrity and consumer protection and associated fiscal contingencies are inherent in using bitcoin.” This demand on El Salvador is a result and part of the final report of the Monetary Fund’s bilateral talks with the government. The IMF proposed narrowing the scope of the Bitcoin Act by removing Bitcoin’s status as “legal tender”. Part of El Salvador’s nationwide take to bitcoin was also the launch of a national virtual wallet called Chivo, which allows for free transactions and fast cross-border payments.

The project has high goals: in El Salvador, about 70 percent of citizens do not have access to traditional financial services. Therefore, Chivo must provide an entry point for those who have never participated in the banking system. The IMF agreed that the Chivo e-wallet could facilitate digital payments and thus promote financial inclusion, but emphasized the need for strict regulation and oversight.