The International Monetary Fund (IMF) Executive Board has concluded a 2021 ‘Article IV Consultation’ with El Salvador urging the country to stop using Bitcoin as the legal tender.
It stressed there were large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.
Some directors also expressed concern over the risks associated with issuing Bitcoin-backed bonds.
Key benefits of Bitcoin listed by El Salvador’s digital wallet include its use as a global currency that will open the country to international markets, an ability to save in remittances by removal of intermediaries, and as a foreign investment which can improve the country’s economy.
Last year, The IMF’s Western Hemisphere Department acting director, Nigel Chalk, said the IMF would continue its cooperation with the El Salvador government regarding the country’s adoption of Bitcoin as legal tender.
However, he then expressed concerns about El Salvador’s decision, adding that it raises fiscal and financial stability questions.
“There are fiscal issues that are associated with the adoption of Bitcoin as legal currency,” he said.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.