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Jan 26, 2022

IMF to El Salvador:  Remove bitcoin’s status as legal tender

Foreign Affairs News Desk

The International Monetary Fund’s (IMF) executive board has warned El Salvador—the Latin American nation against moving to make bitcoin a legal tender, on Tuesday.

Calling for “strict regulation and oversight of the new ecosystem, the board members stressed that there are large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities,” the statement read.

“Narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status,” the board urged.

El Salvador has become the first country in the world to make the cryptocurrency Bitcoin legal tender in September last.

The Bitcoin Law was passed by the Legislative Assembly of El Salvador on 8 June 2021, giving the cryptocurrency bitcoin the status of legal tender within El Salvador proposed by a 39-year-old country’s 43rd President Nayib Armando Bukele Ortez serving since June 1, 2019.

“The adoption of a cryptocurrency as legal tender, however, entails large risks for financial and market integrity, financial stability, and consumer protection,” the members said in the statement. 

Known as the Land of Volcanoes, El Salvador has frequent earthquakes and volcanic activity. It is the only country in Central America that does not have a coastline on the Caribbean Sea.

Currently, El Salvador’s government holds 550 Bitcoin which is equivalent to about US $26 million. The country’s other currency is the U.S. dollar.