IMF Still Not Sold on El Salvador’s Bitcoin Adoption
The executive board of the IMF published a report on Tuesday (January 25, 2022) following the recently concluded Article IV consultation with El Salvador. While the report noted the country’s effective management of the COVID-19 pandemic and acknowledged that the economy is already recovering, it expressed concerns about El Salvador’s adoption of Bitcoin, stating that the use of BTC came with risks that could affect consumer protection, financial integrity, and financial stability.
El Salvador made history in June 2021, after President Nayib Bukele’s proposal to make Bitcoin the country’s second legal tender passed a supermajority vote. The Bitcoin Law was officially implemented later in September. While many in the crypto community have applauded Bukele’s bitcoin adoption move, the El Salvadoran President has faced criticisms, many of which have come from international bodies like the IMF.
Shortly after the landmark decision in June, the IMF said that making BTC legal tender raised legal, macroeconomic, and financial issues. The global lender sounded another warning about bitcoin risks later in November, stating that BTC’s volatile nature made it unsuitable as a legal tender.
Meanwhile, the IMF has gone a step further in its latest report, asking El Salvador to narrow the scope of its Bitcoin use, recommending a strict regulatory framework. Meanwhile, the document acknowledged the country’s efforts at trying to broaden financial inclusion, with the introduction of the Chivo wallet.
Bukele Unmoved by IMF Warnings
President Bukele does not seem to be deterred by the criticisms he has faced for adopting Bitcoin and has instead remained a vocal supporter of BTC. The El Salvadoran leader believes that BTC adoption is beneficial to the country’s economy.
In addition, the President has been on a BTC buying spree since September 2021. Bukele announced the government’s latest purchase of 410 bitcoin ($15.4 million) earlier in January 2022, bringing the total number of BTC held to 1801. The President noted that the Bitcoin purchase was “cheap”, considering the current market retracement.
Indeed, the price of bitcoin reached an all-time high (ATH) of $69,000, before plunging to around $33,000. However, a slight recovery has occurred, with BTC presently trading around $37,000.
While President Bukele’s bitcoin gambit has been panned by the majority of the global financial elite, other countries may follow suit, banking on BTC to reach astronomical valuations in the future.