Should El Salvador Ditch Bitcoin as Legal Tender? – IMF Thinks So

The International Monetary Fund (IMF) monitors the global economy and provides loans and assistance to its 190 member countries. They recently urged El Salvador to abandon Bitcoin as a legal tender. 

The IMF collects economic data and reports it to the board during regular meetings with its member countries. The board then consults with the government about issues and potential solutions.

The IMF believes El Salvador has a Bitcoin problem. After the meeting, the international organization said that the Central American country's economy is contracting, increasing its public debt. 

According to the report, the fact that Bitcoin has been the national currency since September 2021 is detrimental to the country's economic recovery. 

This is because: "Making a cryptocurrency legal tender poses significant risks to the market and financial integrity, financial stability, and user protection. 

It may also result in uncertain liabilities." The IMF has been against this since June 2021, when El Salvador's President Nayib Bukele said at the Bitcoin Conference in Miami that he would pass legislation requiring people and businesses to accept Bitcoin as payment unless they lacked adequate internet access. 

The US dollar has been the country's sole currency since 2001. According to an International Monetary Fund spokesperson, "Effective regulatory measures are important when dealing with crypto assets."

This implies that the country was not ready. Nonetheless, the Legislative Assembly quickly signed the bill into law. So, El Salvador became the world's first country to use Bitcoin as its official currency three months later. 

At the start of the consultation process, The IMF told El Salvador again in November 2021 that it should stop using Bitcoin as legal currency due to its volatile price. 

Nevertheless, Bukele went on to add approximately 1,800 BTC to the country's treasury. Furthermore, when the market crashed, he purchased an additional 410 BTC. 

As a result, according to Bloomberg, El Salvador had $12 million in unrecovered losses as of January 12.

On January 21, 2022, El Salvador's government spent $15 million on a new purchase of Bitcoins. El Salvador, in Central America, made Bitcoin legal last year and has been increasing its Bitcoin reserves.

Following the recent drop in the value of Bitcoin, El Salvador purchased 410 more tokens for $15 million. 

Bitcoin's price dropped from $42,270 to as low as $35,000. On Twitter, President Nayib Bukele provided additional information about purchasing the dip. 

El Salvador's President made a tweet to his 3.4 million followers "Some guys are selling for an absurdly low price." At this point, the reserve could contain more than 1,500 Bitcoins worth more than $50 million. 

Bukele, on the other hand, does not appear to be affected by Bitcoin's volatility. He remains a supporter of cryptocurrency. Bukele has been working to make crypto more accepted and useful in his country.

This is from installing Bitcoin ATMs to creating a government-backed Bitcoin wallet for Salvadorans called Chivo. 

However, people in other parts of the world are still debating how to regulate the cryptocurrency industry. Central governments in India and Russia, among others, have recently announced plans to prohibit crypto activities. 

Because governments oppose the use of cryptocurrencies, Bitcoin and other cryptocurrencies lost a significant amount of value between November and January.

One of the most common criticisms critics level at cryptocurrencies is that they will never be widely used. 

In other words, it means they will never be very useful. However, on September 7, 2021, El Salvador became the first country to accept Bitcoin as legal currency. 

This has the potential to change things for the better. A small Central American country using Bitcoin is unlikely to be enough to make it a global currency, but it could be the first domino to fall. 

Other countries are already investigating El Salvador's historic move, and if they think it's a good idea, Bitcoin could be in use globally.  Here are four more countries to watch because it appears that they will follow El Salvador's lead.

Panama borders El Salvador, so it's not surprising that it may soon recognize Bitcoin as a legal tender.

Moreover, unlike many other countries that were said to be considering doing the same, Panama is the country closest to becoming the second to accept Bitcoin as legal tender despite the lack of legislation.

Cuba has not yet fully accepted cryptocurrencies as legal tender, but it has taken steps in that direction. As a result, the country now officially recognized and regulated cryptocurrencies, allowing its citizens to use them freely. 

Post a Comment

Previous Post Next Post