The IMF wants El Salvador to rethink its Bitcoin-as-a-legal-tender policy before it grants a $1.3 billion loan to the Central American country.
The International Monetary Fund (IMF) has raised concerns over the legal status of Bitcoin in El Salvador. The world lending body raised the issue as talks between its executives and the El Salvadoran government stymied as the former tried to access a loan from the international agency.
The IMF executives who are in charge of the fund represent 190 member countries that are contributors. They highlighted the need to strip Bitcoin of its legal tender status due to the instability associated with it, before a serious consideration would be made for the $1.3 billion loan that the Central American country seeks to access.
Bitcoin Risks To Financial Stability
A statement from the IMF stated that “financial stability, financial integrity, and consumer protection” are important factors to consider in a financial market and posited that these are lacking in the country’s finance space. This is considering the wide scope of the Bitcoin law giving the cryptocurrency legal status in the country. According to some directors of the agency, the issuance of Bitcoin-backed bonds pose appreciable risks for the country.
The annual economic valuation of El Salvador Article IV was the subject of discussion by the directors of the lending agency when the issue was raised.
El Salvador is the only country that has made Bitcoin a legal tender. The country has also bought 1801 bitcoins since it announced that the cryptocurrency and USD are officially designated legal tenders in the country.
It is left to be seen how the IMF opinion would affect the country’s resolve considering that President Nayib Bukele has become an icon of sorts after elevating BTC to legal status in the country.