IMF raises concerns about El Salvador's Bitcoin move, citing legal and economic issues
- El Salvador passed legislation to make Bitcoin legal tender, becoming the first country to do so.
- The IMF says that the country’s move raises macroeconomic concerns.
- The organization will meet with President Nayib Bukele to discuss the new law.
The International Monetary Fund has raised concerns regarding El Salvador’s latest decision to make Bitcoin legal tender in the country.
IMF to discuss Bitcoin with El Salvador
During a press briefing from the IMF, spokesperson Gerry Rice stated that the group has been in discussions with lawmakers in El Salvador about a loan to support the country’s economy, a near $1 billion program.
Rice further implied that the organization would be meeting with President Nayib Bukele to discuss the leading cryptocurrency. He said:
“Adoption of Bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis. We are following developments closely, and we will continue our consultations with the authorities.”
The IMF spokesperson added that since cryptocurrencies could pose significant risks, effective regulatory measures are essential when dealing with the new asset class.
El Salvador President Nayib Bukele recently introduced the idea of proposing a bill making the leading cryptocurrency a legal tender over the past weekend at the Bitcoin 2021 conference. The new legislation was quickly passed on June 9, with a supermajority in the country’s Legislative Assembly.
President Bukele has touted the use of Bitcoin for its potential to aid citizens living abroad to send remittances back to the country, while stating that the US dollar will continue as legal tender in parallel.
According to the President, the use of Bitcoin would be optional for individuals and would not pose risks to users. The El Salvadoran government will guarantee convertibility to dollars at the time of transaction with the creation of a new $150 million trust.
Bitcoin is required to be accepted by companies when offered as payment for goods and services under the law in the country. The leading cryptocurrency will be coined as legal tender in 90 days, with its exchange rate set by the market.
While setting up the meeting with the IMF, Bukele said that he tried to explain that the move to accept Bitcoin as legal tender would not change their macroeconomics.
Richard Galvin of crypto fund Digital Asset Capital Management commented:
“The market will now be focused on adoption through El Salvador and whether other nations follow. This could be a key catalyst for Bitcoin over the next two to three years.”
Author
Sarah Tran
Independent Analyst
Sarah has closely followed the growth of blockchain technology and its adoption since 2016.
