The International Monetary Fund (IMF) continues to put pressure on El Salvador. Following bilateral discussions between the financial institution and the Central American country, the former is asking the latter to once again abandon Bitcoin (BTC) as a legal tender. The IMF still believes that BTC poses serious risks to El Salvador’s finances.
The IMF continues to threaten El Salvador on Bitcoin (BTC)
The financial institution of Washington published this Tuesday, January 25 a document summarizing its bilateral discussions with El Salvador. And the least we can say is that the position of the IMF on the country chaired by Nayib Bukele has not moved an iota.
Indeed, the IMF is once again opposed to the adoption of the BTC as legal tender in El Salvador. The institution’s executive committee is urging the country to abandon the use of the cryptocurrency because of the financial risks it would cause.
This opposition from the IMF is not new. In fact, it has been rather recurrent since last June and it is not the only institution to have opposed the Bitcoin law. The World Bank has in fact refused to help El Salvador in its transition to BTC and the rating agency Moody’s has sounded the alarm.
Should El Salvador abandon Bitcoin (BTC) in order to get an IMF loan?
While these IMF criticisms of Bitcoin in El Salvador are not new, they come in a more problematic context for the Central American country. Indeed, El Salvador is negotiating with the IMF to be granted a loan of 1.3 billion dollars.
However, the executive committee implicitly admits that this loan will not be granted without abandoning the BTC. The latter would create financial instability and risks to financial integrity and consumer protection. Similarly, El Salvador could have significant tax liabilities if Bitcoin is used extensively.
As a result, the IMF is demanding that El Salvador abandon Bitcoin as a legal tender as soon as possible. The institution is reducing its demand to this abandonment of legal status and not to the outright banning of BTC.
In addition, the IMF is concerned about the future issuance of Bitcoin-denominated bonds, a promise made by President Bukele, in particular to finance his “Bitcoin City”. Given El Salvador’s recent massive purchases of BTC, it seems unlikely that Bukele will give credence to this latest IMF threat.
