The International Monetary Fund (IMF) issued a statement recommending that El Salvador stop using bitcoin as legal tender. The organization called for an assessment of the financial and consumer risks associated with cryptocurrency shortly after President Nayib Bukele announced the construction of Bitcoin City with cryptocurrency bonds.
El Salvador has used the US dollar as the only means of payment for the past 20 years, but since September, Bitcoin has been officially recognized as a legal currency at the legislative level.
In its statement, the IMF recalled that the official use of bitcoins and cryptocurrencies in general at the state level can jeopardize financial stability. Given the high volatility of cryptocurrency, its use as a legal tender carries significant risks. For this reason, according to the IMF, bitcoin should not be used as a legal means of payment, so the government was advised to at least narrow the scope of cryptocurrency and strengthen regulation of issues related to its turnover.
Recently, Bukele announced that Bitcoin City will be built near the volcano to obtain energy for mining from geothermal sources, and taxes will be almost completely eliminated in the city, leaving only VAT.
This is not the first time the IMF has warned El Salvador in connection with the rapid development of the bitcoin industry in the country. Following the adoption of the historic bitcoin legalization law, the organization predictably opposed the “uncontrolled” currency. Nevertheless, despite the warnings, El Salvador began to implement its plans and even launched its own cryptocurrency wallet Chivo Wallet, as well as deployed many Bitcoin-compatible ATMs in the cities of the country.