El Salvador Makes IMF Rampage: Bitcoin Cannot Be A Legal Payment Instrument

IMF slams El Salvador for Bitcoin adoption (HindustanTimes)

JAKARTA – In the midst of El Salvador's President Nayib Bukele's plan to establish a Bitcoin city, the International Monetary Fund (IMF) again criticized El Salvador. The world monetary system controller said that Bitcoin price volatility is very high and should not be used as a medium of exchange.

For information, El Salvador has become the world's spotlight for adopting Bitcoin as the country's official currency. The regulation came into effect last September. When the market crashed sometime later, El Salvador bought up Bitcoin. Currently, the country is reported to have 1,120 BTC of Bitcoin.

The IMF and its member countries have discussed El Salvador's actions. The discussions included “the adoption of bitcoin as an official medium of exchange, regulation, and supervision of bitcoin service providers, and the Chivo e-wallet”. In the “Staff Concluding Statement of the 2021 Article IV Mission” for El Salvador, the IMF detailed their condemnation of one of these Latin American countries:

“Given bitcoin's high price volatility, its use as a legal tender poses significant risks to consumer protection, financial integrity, and financial stability. Their use also creates a contingent fiscal liability. Due to these risks, bitcoins should not be used as legal tender”.

The IMF also plans to “narrow the scope of the bitcoin law” and urged El Salvador to strengthen “regulation and oversight of the new payments ecosystem”.

The IMF's latest statement comes one day after President Bukele announced plans to build the world's first bitcoin city powered by a volcano and financed by bitcoin bonds. He noted there will be no taxes in bitcoin city except for value-added tax (VAT).

"The plan to issue sovereign bonds and use the proceeds to buy bitcoin and fund the infrastructure plan announced on November 20, took place after the mission's technical work was completed, and was not discussed with the authorities", the IMF said.

President Nayib Bukele was not silent and responded to criticism from the IMF by saying: “While we clearly disagree on some things, such as the adoption of bitcoin, the analysis our country is doing is interesting”.