IMF Urges El Salvador To Cancel It’s Use Of Bitcoin As Legal Tender

January 30, 2022 4:44 pm

The country of El Salvador had made news earlier when it announced the creation of a $150 million trust fund back when the nation made Bitcoin legal tender.

The International Monetary Fund (IMF) is now asking the country to back track on the decision to make Bitcoin legal tender and to also dissolve the fund.

The purpose of the fund was to allow for easy conversion between Bitcoin and USD in order to help encourage faster crypto adoption.

There was also criticism from the government agency that there shouldn’t incentives like the $30 bonus that the country would give if people started using the digital wallet “Chivo”.

PBS reports:

The IMF also recommended eliminating the offer of $30 as an incentive for people to start using the digital wallet “Chivo” and increasing regulation of the digital wallet to protect consumers.

It suggested there could be benefits to the use of Chivo, but only using dollars, not Bitcoin.

“In the near-term the actual costs of implementing Chivo and operationalizing the Bitcoin law exceed potential benefits,” the report said.

“What we emphasize in the report is that having a digital wallet, that allows people to make digital means of payment and keep their savings there, especially in US dollars, can bring benefits to the economy as well as to growth but again, I’m emphasizing US dollar because Bitcoin have has bitcoin price is volatile,” Alina Carare, head of the IMF’s mission in El Salvador, said in a call with reporters Friday.

The government of El Salvador fired back at the IMF and responded that the launch of the “Chivo” digital crypto wallet had actually increased financial inclusion and allowed millions of people who didn’t have bank accounts be a part of the financial system.

Since the launch, it was observed that the pros had far outweighed the cons contrary to the IMF’s statements.

Salvadoran President Nayib Bukele had led the country’s push to adopt Bitcoin as legal tender alongside the USD last year in September.

Bukele in particular has been dismissive of the IMF’s recommendation on Bitcoin and continues to advocate the use of El Chivo using Bitcoin to make financial services easily accessible to everyone in the country.

The change had also caused an increased in tourism for the nation at it became an attraction as a worldwide crypto hub for those who supported widespread adoption of crypto.

With that being said, the country acknowledged that there could be more regulation, but did not see any reason to remove or change the Bitcoin law that was just passed.

The IMF and El Salvador are also currently in discussions regarding lending.

USNews reports:

El Salvador and the IMF have been negotiating $1.3 billion in lending for months.

Carare did not say if the possible loan would be held back if El Salvador continued using Bitcoin as legal tender.

When asked, Carare said, “we continue to have a strong engagement with the government of El Salvador.”

The discussions seem to have little impact on Bitcoin as price continues to consolidate after the recent decline in the overall market since the start of the year.

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