The International Monetary Fund urges El Salvador to drop Bitcoin status as legal tender

midian182

Posts: 7,774   +79
Staff member
In brief: El Salvador may be embracing Bitcoin, but the International Monetary Fund (IMF) doesn’t share the country’s enthusiasm and recommends removing the digital currency’s legal tender status due to financial and consumer risks.

Bloomberg writes that El Salvador, which became the first country to accept Bitcoin as legal currency (alongside the US dollar) in 2021, asked the IMF for a $1.3 billion loan last year, but the organization is reluctant to hand over the money due to its Bitcoin concerns.

Last year, the IMF conducted one of its consultations in which staff visit a country to prepare an Article IV economic evaluation report for the executive board. In a statement Tuesday, IMF executive directors agreed with findings highlighting the “large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.” They urged El Salvador authorities “to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status,” and some members also “expressed concern over the risks associated with issuing Bitcoin-backed bonds.”

After passing its Bitcoin law in June last year, the cryptocurrency became legal tender in El Salvador in September— the same day BTC fell $10,000. The country has repeatedly ‘bought the dip’ each time the price drops, and it now holds around 1,801 Bitcoin, currently worth over $68 million.

El Salvador has continued to focus on all things crypto, from its volcano-powered mining project that produced its first currency in October, to plans for a Bitcoin city that will have no income, property, capital gains, or payroll taxes, just value added tax.

But the country has faced pushback over its plans. The World Bank refused to help with its implementation of Bitcoin, and some citizens are far from happy about using cryptocurrency.

Permalink to story.

 

Squid Surprise

Posts: 5,303   +4,942
Wow... shocking that the IMF wants them to drop Bitcoin... wait... this wouldn't be a conflict of interest for the IMF in any way... nah....

Amazing that this even rates as a story... the real headline might read "IMF hesitating over loaning funds to El Salvador, uses Bitcoin as flimsy lever to increase interest rates."

 

Watzupken

Posts: 570   +475
Wow... shocking that the IMF wants them to drop Bitcoin... wait... this wouldn't be a conflict of interest for the IMF in any way... nah....

Amazing that this even rates as a story... the real headline might read "IMF hesitating over loaning funds to El Salvador, uses Bitcoin as flimsy lever to increase interest rates."
We need to ascertain what is the loan going to be used for. If it is for them to buy more dips in BC, then it is a high risk loan that may never get repaid. Everywhere, you should have heard of people's plight taking loans to invest in some sort of crypto and gone bust. It is a highly volatile currency that ideally should not be allowed for most people who know nuts about it to invest in.
 

Goamist

Posts: 45   +79
Wouldn't make more sense to just cash in their Bitcoins and pump the money into their economy?
If they would do so and drop the legal status of the Bitcoin, they might even get IMF to lend them the money. Who says that they have to give up on their mining afterwards?
 

Squid Surprise

Posts: 5,303   +4,942
The loan is almost certainly not for buying more Bitcoin... they made it legal tender because their own currency is basically non-existant - they rely on the US Dollar...

The IMF will probably end up loaning them the money eventually - this is simply a ploy to get a better interest rate... The IMF only has one concern - MONEY.

Edit: an interesting take on this..
 
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Vulcanproject

Posts: 1,506   +2,736
El Salvador will just be this interesting experiment and I think they should be allowed to do what they want, so we can sit back and see the result.

I can't say I think it'll actually turn out well but hey, we're not their mother. They're literally called 'The Saviour' after all.
 

fps4ever

Posts: 866   +1,284
El Salvador will just be this interesting experiment and I think they should be allowed to do what they want, so we can sit back and see the result.

I can't say I think it'll actually turn out well but hey, we're not their mother. They're literally called 'The Saviour' after all.

I agree. It's like any other investment. Buy low and sell high. Either it works or it doesn't but eventually some country was going to try.
 

Lounds

Posts: 1,080   +954
IMF is modern day colonialism. The only reason they're opposed to this is that El Salvador might have more money than most Western countries and make Western economies want to give up Fiat currency.
 

captaincranky

Posts: 18,527   +7,370
Wouldn't make more sense to just cash in their Bitcoins and pump the money into their economy?
If they would do so and drop the legal status of the Bitcoin, they might even get IMF to lend them the money. Who says that they have to give up on their mining afterwards?
But then, what the hell would they do with their volcano? :confused:
 

kiwigraeme

Posts: 981   +719
When BC came to El Salvador it was a mess - they had a 1 minute delay feature for people to see price - So was easy for profit takers to use real time arbitrage to make profit - on both selling and buying.

Plus it's full on stupid . You want some of the poorest people in the world to hold their wealth in a Yoyo Ponzi scheme - buy at $60000 , now $30000 - - how you going to afford your seeds to grow , your kids books for school . Poor people don't want a joke , they want certainty .
If was facilitated mainly to reduce bank transfers back from say The USA - a noble cause , other countries like Philippines rely on such money as well.
Why not setup a Bank in The USA or Emirates etc and get commercial settlement rates .
I'm sure most developing countries run USD , Euro accounts anyway to pay for imports. stability etc .
Then give citizens dual currency accounts - with nominal conversion fees
Absolute stupidity
 

tellmewhy

Posts: 179   +86
In any major reform there are always some modern Luddites who oppose the reform because they do not like competition from the new entry.

This sloppy social behavior has sometimes led to comic situations like this when IBM, for example, has 10 times more IP addresses than the whole of China.
 

kiwigraeme

Posts: 981   +719
I'm no crypto expert but don't be shocked if bitcoin is worth millions per coin in the very distant future.
Exactly you are no expert -given there will be more BC in circulation then - you are saying a total market cap of say 50 Trillion dollars plus ( you said millions ) makes sense ????????

most people hoping to get rich are just buying small amounts - you will need a a 60 fold increase in people who are happy to watch their money yoyo .
Most of these will have liquidity problems - so a lot will be selling at 30% losses - and this will encourage that 60 fold number to join - while animals, plants, fish ,human babies , old continue to die from global warming?
BC is destined to be dropped like a bad smell - the big holders who have been making the money by pumping and dumping will get out - they won't live forever - so why die mega rich - they were young in 2012- but they will age - they track the marks/the shills who fluff for them , the groundswell of images of energy use -Its a Poland at the moment - that's helping kill this planet . The young are pissed off ,the old middleclass who have no BC will want to make amends - an easy sacrifice - as nothing lost