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IMF Urges El Salvador to Ditch Bitcoin’s Legal Tender Status

 


After adopting bitcoin as national currency, Central American country plans to issue bonds backed by bitcoin as negotiations with the IMF stall


The International Monetary Fund urged El Salvador to strip bitcoin of its status as legal tender because of its large risks to financial stability, the latest twist in protracted talks between the fund and the highly indebted Central American country to secure a $1.3 billion loan.

The fund said on Tuesday that El Salvador’s recent adoption of bitcoin as a national currency also creates risks for financial integrity, consumer protection and fiscal liabilities in a tiny economy with limited government resources.

The IMF’s executive directors “urged the authorities to narrow the scope of the bitcoin law by removing Bitcoin’s legal tender status,” the fund said.

El Salvador became the world’s first country to adopt bitcoin as legal tender in September, requiring all businesses to accept the digital currency as a form of payment.



The measure was cheered by the global community of cryptocurrency traders and miners, but economists noted that President Nayib Bukele didn’t address concerns about the potential disruption that the volatile crypto asset could cause in a $26 billion economy.

More recently, the 40-year-old Mr. Bukele said his country will issue $1 billion in bonds backed by bitcoin this year, part of an effort to attract crypto capital as his government faces rising debt-servicing costs and hefty sovereign bond payments.


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