IMF has always been critical of cryptocurrencies. Recently it advised El Salvador to stop using bitcoin as a legal tender. Members of the IMF board said that bitcoin could affect the country’s financial system negatively.
Comments Made by the Board Directors of IMF
IMF is involved in promoting worldwide economic growth and financial stability. It issued a report where it said that giving bitcoin the status of a legal currency by El Salvador can pose many risks to its economy. The board directors of IMF have urged the country to stop implementing its bitcoin law because of these risks. They advised the country’s authorities to remove the bitcoin’s status as legal tender by changing the recently implemented bitcoin law. This report comes soon after IMF economists commented in a blog that countries with widespread cryptocurrency use would face the risk of financial instability.
El Salvador Stands by Its Bitcoin Law
The country has stood by its bitcoin law and continues to integrate this cryptocurrency with its economy. Nayib Bukele, the president of the country, revealed the plans to power bitcoin mining by using volcanic energy. He said the country will make investments in the production of geothermal energy for this purpose. The president has been purchasing and adding bitcoin to the treasury of the country. El Salvador last week purchased 410 bitcoins, taking its total bitcoin holding to 1801 units.
IMF has also criticized the recently launched e-wallet Chivo. Directors have emphasized the need to boost financial inclusion with digital payment systems. They noted digital payments like the e-wallet Chivo can help with this objective, but strong regulations are needed to keep a watch on bitcoin and Chivo activities.