It is a bad idea for El Salvador to accept bitcoin as legal currency, warns the IMF

June 9th The saviour was the first country to use Bitcoin What legal currency. But while the president of the Central American country, Nayib bukele, celebrates in style the decision of the Legislative Assembly that International Monetary Fund (IMF) may find this a bad idea as it poses challenges on several levels.

The order of the Salvadoran government reads: “Every economic actor must accept Bitcoin as a means of payment”as the President is certain that this will add to the people’s banking business and avoid losing “millions of dollars” on remittances from abroad.

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It is a bad idea for El Salvador to accept bitcoin as legal currency, warns the IMF
It is a bad idea for El Salvador to accept bitcoin as legal currency, warns the IMF

However the IMF see this measure from a different perspective.

“The introduction of Bitcoin as legal tender raises a number of macroeconomic, financial and legal problems that require very careful analysis”, he claimed Gerry Reis, IMF spokesman at a press conference this Thursday.

“We are closely monitoring progress on this matter and will continue our consultations with the authorities”Rice added, before confirming, that they would hold a meeting with President Bukele to discuss the matter.

Regulatory issues for Bitcoin in El Salvador

“What we have generally said in the past is that cryptocurrency investments can pose significant risks and effective regulatory measures are very important to counter them.”commented the IMF spokesman.

One of the organization’s concerns is the speed at which the Bitcoin law and the brief regulations contained therein already contains only 16 articles and leaves a lot of room for interpretation.

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Economy Minister MarĂ­a Luisa Hayem presented the bill to the legislature on Tuesday evening, June 8th.

In less than 24 hours, after a brief discussion in the Finance Committee of Congress, it was given the go-ahead to be put before the entire Parliament, where it was approved with a vote of 62 MPs. Of these, 56 belong to the New Ideas (NI) party bank, which represents the majority and is an ally of President Bukele, while minority opposition parties refused to support the regulations.

“The purpose of this law is to regulate Bitcoin as legal tender, unrestricted with liberating power, unlimited in every transaction,” says Article 1 of the new Bitcoin Act.

He also points out that “the exchange rate” between Bitcoin and US dollar “is freely determined by the market”.

President Bukele called on the state-owned energy company to offer alternatives to Bitcoin mining in a “very cheap, 100% clean, 100% renewable and emission-free environment for our volcanoes,” he announced on Twitter.

Since last April the government of The saviour is talking to him IMF get one new loan of approximately $ 1.3 billion. This would be destined to revive the economy, which contracted 7.9% in 2020 due to the Covid-19 pandemic.

Last year, the agency provided the country with approximately $ 389 million in emergency aid through the Rapid Financing Instrument (IFR) to help it cope with the health crisis.

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