IMF urges El Salvador to scale back Bitcoin
GS Paper - 2 (International Relations)
The International Monetary Fund (IMF) said that El Salvador should dissolve the USD 150 million trust funds it created when it made the cryptocurrency Bitcoin legal tender and return any of those unused funds to its treasury.
- The recommendation was part of the international lender's report on El Salvador's economy and went beyond its statement earlier this week urging El Salvador to drop Bitcoin as legal tender.
- The trust fund was intended to allow the automatic conversion of Bitcoin to US dollars El Salvador's other currency to encourage people wary of adopting the highly-volatile digital currency.
- The IMF also recommended eliminating the offer of USD 30 as an incentive for people to start using the digital wallet Chivo and increasing regulation of the digital wallet to protect consumers.
- It suggested there could be benefits to the use of Chivo, but only using dollars, not Bitcoin.
- The IMF expressed concern over El Salvador's growing exposure to Bitcoin's volatility and urged greater transparency.
- In June, El Salvador's parliament approved a law to allow the crypto money to be accepted as tender for all goods and services in the small Central American nation, along with the US dollar.
- The government is installing more than 200 Bitcoin teller machines, some guarded by soldiers to prevent possible arson by opponents.
- The World Bank, International Monetary Fund and Inter-American Development Bank have expressed concerns about El Salvador's bitcoin adoption.