The International Monetary Fund (IMF) has called for El Salvador to reverse its decision to make Bitcoin legal tender.
In September, El Salvador became the first country in the world to make Bitcoin legal tender alongside the US dollar, requiring all businesses in the country to accept crypto payments.
Earlier this week the IMF concluded a consultation into the policy, urging El Salvador to rethink its crypto policy which it believes poses financial stability risks. The decision to adopt Bitcoin as legal tender will make it harder for the impoverished South American nation to acquire the $1.3bn loan it is seeking from the international financial institution, Bloomberg first reported.
The board’s directors have now “urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status”, according to a statement.
They highlighted the “large risks associated with the use of Bitcoin on financial stability, financial integrity and consumer protection” and with issuing Bitcoin-backed bonds.
El Salvador’s bitcoin policy has been met with a mixed reaction domestically. Technical glitches, protests and wild swings in the price of Bitcoin all marred the experiment in its first few months. However, Salvadoran President Nayib Bukele, who spearheaded the policy, insists it is popular pointing to the wide uptake of government issued crypto wallets.
The IMF noted the importance of a regulatory frameworks for digital assets, which are largely lacking in the world economy. In its World Economic Outlook report published yesterday, the IMF noted that noted “the Board of Governors of the Reserve System, Federal Deposit Insurance Corporation, and Office
of the Comptroller of the Currency” are engaged in a “crypto sprint” to provide common legal guidelines for crypto assets.