The International Monetary Fund (IMF) on Monday said that considering risks related to bitcoin, El Salvador should not use the cryptocurrency as legal tender.
"Given bitcoin's high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability. Its use also gives rise to fiscal contingent liabilities," the IMF said in its staff concluding statement of the 2021 Article IV mission to El Salvador.
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The IMF regularly undertakes Article IV missions to member countries to consult with government officials before they request to use IMF resources.
In September, El Salvador became the first country to adopt bitcoin as a legal tender, alongside the U.S. dollar.
"Because of those risks, bitcoin should not be used as a legal tender. Staff recommends narrowing the scope of the bitcoin law and urges strengthening the regulation and supervision of the new payment ecosystem," said the IMF.
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President Nayib Bukele has touted the use of bitcoin for its potential to help Salvadorans living abroad to send remittances back home, while saying the U.S. dollar will also continue as legal tender. He has said it will bring financial inclusion, investment, tourism, and development.
"Although we obviously do not agree on some things, such as the adoption of #Bitcoin, the analysis it makes of our country is interesting," Bukele said of the IMF statement.
The IMF also estimated El Salvador's economy will grow by around 10% in 2021 and 3.2% in 2022 and said it expects the Central American nation's public debt to reach 85% of its GDP by the end of 2021.
Published - November 23, 2021 05:55 pm IST
