IMF to actively engage with El Salvador on Bitcoin

IMF loan and adoption of Bitcoin will help Salvadorans to access more payment methods in a nation where more than three-quarters of citizens are unbanked

The International Monetary Fund’s Western Hemisphere Department acting director, Nigel Chalk, confirmed the IMF will continue its cooperation with the El Salvador government regarding the country’s adoption of Bitcoin as legal tender.

“We are actively engaged with the El Salvadoran government and helping them think through some of the risks and downsides to address them,” Chalk told a press briefing.

However, he 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.

“And there is also a possible risk in terms of fighting terrorism. We are working with El Salvador to consider this.”

Chalk added that the Bitcoin issue will be up for negotiation between the fund and the country over Article IV of the IMF agreement, which concerns obligations regarding exchange arrangements.

IMF decision on loan expected in November

Recently, El Salvador central bank President Douglas Rodriguez said the country’s first-of-its-kind adoption of Bitcoin won’t be an obstacle for the government to reach a $1.3 billion loan agreement with the IMF.

He said the cryptocurrency will not be seen as a speculative asset anymore but will be acknowledged as a legitimate payment system supported by Chivo – the government’s Bitcoin wallet.

“We don’t see any risks. Perhaps, upside risks,” Rodriguez said.

Bitcoin will become a payment system, a system for financial inclusion.”

In June, El Salvador President Nayib Bukele declared that Bitcoin would become legal tender in his country. Several days later, the Salvadoran legislature passed the Bitcoin Law, which went into effect in September.

The IMF is expected to release its latest review on El Salvador’s finances and economics next month.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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