El Salvador should not use bitcoin as legal tender, the IMF said

“Bitcoin is characterized by high price volatility. Its use as legal tender therefore carries significant risks in the areas of consumer protection, financial integrity and financial stability, “the IMF said in a statement.

The fund’s recommendation is therefore clear. “Because of all the risks mentioned, bitcoin should not be used as legal tender,” the IMF recommended. Otherwise, it is said that there is a risk of instability and inflation in this poor Latin American country.

At the same time, Salvadorans have a choice, if they do not want to pay with bitcoin, they can continue to use the US dollar. However, the government has enticed people to pay with cryptocurrency, as it distributes approximately $ 30 ($ 680) in bitcoin to all users when it first activates Chivo’s official virtual wallet.

The IMF report is not just about bitcoin, but about the overall state of El Salvador’s economy. According to the fund’s estimates, it will grow by 10 percent this year, but a slowdown to 3.2 percent is expected next year.

Nayib B Watch

Photo: Jose Cabezas, Reuters

Salvadoran President Nayib Bukele, who is a big supporter of cryptocurrencies, has already responded to the IMF’s recommendations. It was at his instigation that the government accepted bitcoin as the official currency.

“We obviously disagree with the IMF on some things, such as the adoption of bitcoin. Nevertheless, the analysis of our country’s fund is interesting, “said Bukele.

Bitcoins and other virtual currencies

There are many virtual currencies. One of the oldest and currently most popular are the so-called bitcoins. They were established in 2009, but have enjoyed greater popularity in recent years. This currency was designed so that it could not be influenced by any government or central bank.

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Cyber ​​coins are “minting” a network of computers with specialized software programmed to release new coins at a steady but declining pace. The number of coins in circulation is expected to reach 21 million in the end, which is to be around 2140.

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