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The International Monetary Fund (IMF) has criticized El Salvador’s decision to elect bitcoin as legal tender.
In a publication released on Monday, the financial regulator recommends that the Central American country should yield caution as well as tighten the regulatory and supervisory framework of its newly adopted payment ecosystem.
The IMF further highlighted the “significant risks” associated with bitcoin and also advised El Salvador to streamline the current scope of its Bitcoin Law.
“Given bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability,” IMF’s staff concluding statement of the 2021 Article IV mission to El Salvador read. “Its use also gives rise to fiscal contingent liabilities.”
The IMF also added that the country must conduct a “very careful analysis.” before buying more bitcoins due to the negative effects it may have on the Salvadoran economy.
Some days ago, Newsbsc reported the proposal by President Nayib Bukele to build a bitcoin city in the country. Mr. Bukele disagrees with the IMF regarding the adoption of bitcoin as a legal tender, while describing the overall report as “interesting.”
“Although we obviously do not agree on some things, such as the adoption of #Bitcoin, the analysis it makes of our country is interesting,” Bukele said.