The International Monetary Fund is advising El Salvador to tame its obsession with bitcoin and remove its legal tender status, as the cryptocurrency continues to suffer from sharp volatility.
El Salvador recently became the first ever country to make bitcoin a legal tender, and it appears that it has not been faring all too well. The country’s president, Nayib Bukele, proudly assured El Salvadorians that the cryptocurrency could be used to send remittances to family members, buy goods and services, and pay taxes— and even went as far as to purchase tens of millions of dollars worth of bitcoin using public funds.
However, given the volatile swings that accompany virtual currencies, Bukele’s bitcoin purchases have yet to heed any financial gains. Despite this, the 40-year old president plans to circulate sovereign bonds linked to the cryptocurrency, which would be used to build a volcano-powered “bitcoin city.”
But, it appears that Bukele’s bitcoin optimism has hit a nerve with IMF executive directors, who are raising alarm over the president’s latest crypto plans. “[They] stressed that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities,” read a statement from the organization published on Tuesday.
The IMF is urging El Salvador— which is also currently pursuing $1 billion in financing from the organization— to abandon bitcoin’s legal tender status due to its risks and rampant volatility. So far, Bukele’s bitcoin experiment has not heeded the results he’s been hoping for, as day-to-day use of the cryptocurrency has yet to materialize.
Information for this briefing was found via the IMF. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.