JAKARTA - Members of the executive board at the International Monetary Fund are urging lawmakers in El Salvador to no longer recognize Bitcoin as legal tender.
The IMF reported on Tuesday, January 25, that while digital payments have the potential to increase financial inclusion in the Central American country, the use of Bitcoin (BTC) as a legal tender carries “major risks” related to financial stability, financial integrity, and consumer protection. .
The executive board director urged authorities in El Salvador to “narrow the scope of the Bitcoin law by removing Bitcoin's legal tender status,” also expressing concern about the potential risks of issuing Bitcoin-backed bonds.
Nope, I was wrong, didn't miss it.El Salvador just bought 410 #bitcoin for only 15 million dollars Some guys are selling really cheap ️ https://t.co/vEUEzp5UdU
— Nayib Bukele (@nayibbukele) January 21, 2022
The officials' recommendations came after the conclusion of the Article IV consultations in El Salvador. According to the IMF, during such consultations, teams of economists visit a country "to assess economic and financial developments and discuss the country's economic and financial policies with government officials and the central bank."
Prior to the implementation of the El Salvador Bitcoin Law in September 201, IMF officials warned that some of the consequences of a country adopting BTC as its national currency “could be dire,” including the risk of domestic prices becoming highly volatile, and assets becoming unstable used in contravention of Anti-Laundering measures. Money and Combating the Financing of Terrorism.
The IMF has previously issued statements to small countries considering adopting crypto and claimed that doing so would “increase risks to macroeconomic and financial stability and financial integrity.”
Since the Bitcoin Act came into effect in September 2021, El Salvador President Nayib Bukele has used his Twitter account to announce several BTC purchases totaling 1,801 BTC – worth around 67 million US dollars at the time of publication. The latest buy of 410 BTC came as the price of the crypto asset fell below US$37,000 for the first time since July 2021.
Cointelegraph reported on January 14 that El Salvador's recognition of BTC as legal tender could affect the country's credit prospects, according to Moody's Investors Service. Analyst Jaime Reusche reportedly said that Bitcoin "certainly adds to the risk portfolio" of a country that has been struggling with liquidity problems.
According to data from Cointelegraph Markets Pro, the price of Bitcoin is 36,550 US dollars at the time of publication of this news, having fallen by more than 12% in the last seven days. The crypto asset briefly fell to $33,000 on January 24 before returning to $36,000.
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