IMF urges El Salvador to drop Bitcoin as legal tender

The IMF’s Executive Board recommended that El Salvador strip Bitcoin of its status as legal tender in the country.

Officials noted that the Chivo electronic wallet could boost financial inclusion, but stressed the need for strict regulation of Bitcoin.

They also flagged risks to financial stability linked to the use of the first cryptocurrency.

The organisation expressed concern about plans to issue Bitcoin bonds worth $1 billion.

The country is in talks with the IMF for a loan of $1.3 billion, Fortune reported.

On 7 September 2021, the law recognizing digital gold came into effect as legal tender in El Salvador. The government bought 550 BTC for the state fund.

Since then, El Salvador has purchased a total of 1,801 BTC for $85.5 million. On the latest replenishment of the state fund by 410 BTC, President Nayib Bukele said on 22 January 2022.

In June 2021, the IMF warned El Salvador about the risks and regulatory issues that could arise from recognizing Bitcoin as legal tender.

In November the IMF criticised the legalization of the first cryptocurrency following a visit by its staff to the country. Experts recommended closing the state Bitcoin trust.

In January 2022, the renowned economist and critic of digital gold Nouriel Roubini urged the Salvadoran government to impeach Bukele over his investments in the first cryptocurrency.

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