The International Monetary Fund (IMF) has stated that the risks surrounding bitcoin use in El Salvador have not necessarily shown themselves yet. However, the agency has reported it’s necessary to stay aware and that El Salvador still warrants both attention and transparency. The IMF Is Still Worried About El Salvador and BTC El Salvador – which at one point was one of the smallest nations in the world and didn’t strike fear or interest in many people’s hearts – has become rather controversial over the last two years given it’s the first nation to declare bitcoin legal tender (it did so in September of 2021). The region was the first to say that bitcoin could and should be utilized to pay for goods and services, and thus all businesses – from one day to the next –
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The International Monetary Fund (IMF) has stated that the risks surrounding bitcoin use in El Salvador have not necessarily shown themselves yet. However, the agency has reported it’s necessary to stay aware and that El Salvador still warrants both attention and transparency.
The IMF Is Still Worried About El Salvador and BTC
El Salvador – which at one point was one of the smallest nations in the world and didn’t strike fear or interest in many people’s hearts – has become rather controversial over the last two years given it’s the first nation to declare bitcoin legal tender (it did so in September of 2021). The region was the first to say that bitcoin could and should be utilized to pay for goods and services, and thus all businesses – from one day to the next – were required to accept the digital asset for transactions alongside USD, the fiat currency the nation had long been dependent on.
The IMF and El Salvador have long had a strained relationship in that last year, the organization practically got down on its knees and begged the Central American nation to give up its bitcoin agenda for good. The country was quick to say no, and while the country has been standing on its own two feet for some time, it’s also been hit hard by the sudden decline of the BTC price.
Just two months after El Salvador declared BTC legal tender, the currency struck a new all-time high of about $68,000 per unit. At the time of writing, the asset is in the $21,000 range. In a statement, the IMF said:
Given the legal risks, fiscal fragility, and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to bitcoin.
The IMF also predicts that tokenized bonds based on bitcoin and similar products could come about in the coming months given how strict the utilization of BTC has become in the Central American state.
The most interesting news is that the IMF is willing to admit that nothing’s happened yet. Everyone predicted that El Salvador was making a big mistake with its newfound dedication to BTC. The World Bank even refused to aid the country in its agenda, claiming the asset was too speculative to be taken seriously.
In any case, the IMF is not willing to back off completely, and said it would keep a lasting eye on the country’s bitcoin behaviors and growing use for crypto. The organization said:
Greater transparency over the government’s transactions in bitcoin and the financial situation of the state-owned bitcoin wallet (Chivo) remains essential.
Good in Some Areas, Not So Much in Others
While the IMF praised El Salvador for bringing its economy out of the doldrums, it expressed worry about the country’s rising account deficit.
It also warned of potential spillover due to rising fears of a recession in the U.S.