On Friday. January 28, 2022, International Monetary Fund (IMF) issued a 114-page long report stating how El Salvador should reverse its agreement making Bitcoin (BTC)a legal tender.
El Salvador, in September last year, became the first country to acquire bitcoin as their official currency and legal tender status together with the US Dollar. This choice of the El Salvador government has steered huge protests over the panic that it might bring inflation and uncertainty in the Latin American Country. So far Bitcoin (BTC) has lost almost 50% of its value since last November.
Nayib Bukele, president of El Salvador, has been warned by the International Monetary Fund (IMF) about the risk the cryptocurrency might bring to the country. And specifically stated that it will be quite hard for the country to take any loan from the institution. The member board of directors has prodded the related authorities that they should tone down the capabilities of bitcoin law by withdrawing the status of legal tender.
According to the International Monetary Fund (IMF), in simple words, the absolute cost of applying the Chivo and legalizing Bitcoin is higher than the potential benefits. As per the IMF estimation, The short-term budget cost will be around 1% of total GDP for the year ended 2021-2022. While the estimated profit will be around 0.25% of total GDP for the year ended 2021-2022.
The IMF also pointed out that making the bitcoin law legal will only bring risk and financial instability in the market and will also put consumer’s protection at risk.