IMF calls on El Salvador to abandon bitcoin as a means of payment

El Salvador was the first country in the world to introduce Bitcoin as legal tender. The International Monetary Fund sees risks to financial stability in this – and is putting pressure on the government.

The International Monetary Fund (IMF) has asked El Salvador to revoke the legal tender status of the digital currency Bitcoin. In a statement on Tuesday, the IMF’s board of directors emphasized that there are major risks associated with the use of bitcoin – for financial stability, financial integrity and consumer protection, as well as the associated tax contingencies.

The Central American state was the first country in the world to give the cryptocurrency this status in September. The IMF has been warning of the high price fluctuations of cryptocurrencies for some time.

The Bitcoin Nation

With digital forms of payment such as the Chivo e-wallet introduced in the Central American country, financial inclusion could be promoted, it said. However, the new economic environment around Chivo and Bitcoin must be strictly regulated and monitored.

Negotiations on a credit package worth billions

The occasion was talks on the economic situation, which the Washington-based UN special organization regularly conducts with member states. El Salvador has been negotiating a $1.3 billion loan package with the IMF for some time.

According to El Salvador’s bitcoin law, any merchant technically able to do so must accept the cryptocurrency. Taxes can also be paid in it. Controversial President Nayib Bukele also announced the construction of a “Bitcoin City” in November.

Bitcoin is the most well-known digital currency. It is not controlled by a central bank, but created by a decentralized, energy-intensive computer process. Bitcoin is considered an object of speculation and is subject to violent price fluctuations: the price of a Bitcoin was just under $37,000 on Tuesday – in November it had reached a high of around $68,000.