Nix Bitcoin as legal tender, IMF reportedly tells El Salvador

 The nation adopted bitcoin as legal tender in June 2021. The International Monetary Fund is reportedly urging a rethink.

The International Monetary Fund is urging El Salvador to remove bitcoin as legal tender, according to reports Tuesday. 

The IMF board is also asking for more regulations around the state-sponsored e-wallet used in El Salvador.

Bitcoin became legal tender in El Salvador in June 2021, a move that sparked protests across the country in September.

 When the program launched, Salvadorans were able to use their national IDs to sign up for a cryptocurrency wallet app called Chivo, which came with $30 worth of bitcoin as part of the government's drive to adopt the cryptocurrency.

The IMF didn't immediately respond to a request for comment, but it reportedly said in statements that after a consultation, its board members "urged the authorities to narrow the scope of the bitcoin law by removing bitcoin's legal tender status."

The Bitcoin law in El Salvador ensured the "automatic convertibility" of bitcoin to dollars, but the highly volatile cryptocurrency peaked in November and has since halved in value as of this week.

The Central African Republic has adopted bitcoin as legal tender, making it the second nation in the world -- after El Salvador -- to do so. 

On Wednesday, President Faustin Archange Touadera's office released a statement announcing that the measure is now law. 

According to the bill, the use of bitcoin and other cryptocurrencies in transactions is a legal form of payment along with the CFA franc. 

Touadera's chief of staff, Obed Namsio, noted that the Central African Republic is the first country on the continent to adopt bitcoin as legal currency. 

"This move places the Central African Republic on the map of the world's boldest and most visionary countries," he said, according to a report from the Agence France-Presse.

Legislators approved the bill that allows for cryptocurrencies to be used in online trade and electronic transactions. Additionally, exchanges will not be subject to taxes. 

A developing country, Central African Republic has a population of approximately 5 million. Though it's rich in mineral deposits and other natural resources, it has faced economic and humanitarian challenges for decades. This move into cryptocurrency is one of the nation's latest efforts to improve CAR's financial infrastructure. 

However, the new bill has its detractors. Former prime minister Martin Ziguele, who is now a member of the opposition, raised concerns that the law was passed "by proclamation," and some legislators plan to fight it in Constitutional Court. 

He argues that the law works to undermine the CFA franc, the country's currency. "It [the law] isn't a priority for the country," he said, per the AFP. "This move raises the question: who benefits from it?"

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