The IMF Urged El Salvador To Abandon Bitcoin As Legal Tender, Citing Security Concerns.

President Nayib Bukele doubles down on crypto bets despite recent volatility, prompting criticism. The IMF also stated that the Covid-19 outbreak hindered 10 years of growth, but El Salvador is rapidly emerging.

The International Monetary Fund (IMF) recommended El Salvador on Tuesday to withdraw Bitcoin as a legal lender, citing financial and market integrity issues.

The IMF Executive Directors stated in a press statement that there are significant risks connected with the usage of Bitcoin on economic stability, financial integrity, and consumer rights, as well as the accompanying fiscal contingent liabilities. They encouraged officials to limit the reach of the Bitcoin law by revoking Bitcoin’s legal cash status.

According to the IMF, the COVID-19 epidemic halted 10 years of growth in El Salvador, but the country is swiftly recovering.

The IMF said:

“Robust external demand, resilient remittances, and a sound management of the pandemic–with the help of a disbursement under the Rapid Financing Instrument approved in April 2020–are supporting a strong recovery,”

In this context, the IMF stated that public debt vulnerabilities have evolved, and chronic budget deficits are resulting in considerable and growing financing needs.

The government has designated Bitcoin as legal tender since September 2021. Adoption of a cryptocurrency as legal cash, on the other hand, poses significant threats to financial and market integrity, financial stability, and consumer protection. The Fund also cautioned that it might result in potential obligations.

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