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Bukele Dismisses IMF’s Recommendations on the Risks of Adopting Bitcoin

  • The IMF warned El Salvador that its economy faces serious risks if it does not limit the scope of the Bitcoin Law approved in early September.
  • Bukele remarked that the international body’s report was “interesting.”
  • The IMF report recommended that the Chivo Wallet insure user funds in dollars and bitcoins.

President of El Salvador Nayib Bukele, responded to the International Monetary Fund’s report (IMF) stating that he does not agree on the supposed risks of having adopted bitcoin as a legal tender in the Central American country on September 7th.

The International Monetary Fund report, published on Monday, recommended that El Salvador “limit the scope of the Bitcoin Law” in the economy to avoid risks.

President Bukele responded through his Twitter account, stating that the report from the multilateral credit organization was “interesting” in terms of his analysis of the country.

“Obviously we do not agree on some things, such as the (risky) adoption of bitcoin,” replied the president, who has called himself CEO of El Salvador, downplaying the recommendation.

Following the adoption of bitcoin as a legal tender, the government of El Salvador has made a series of announcements about projects related to cryptocurrency. Last week Bukele announced the construction of the world’s first Bitcoin City.

In its periodic assessment of the country’s financial status, known as Article IV, the IMF acknowledged that the government of El Salvador is making great efforts to promote financial inclusion and attract investments to stimulate economic growth through cryptocurrencies.

But the body pointed out that “given the high volatility of bitcoin” in the market, its adoption as legal tender “involves great risks for consumer protection, the integrity of the financial system, and financial stability.”

According to the IMF, “its use can also cause fiscal contingencies” and warned that “bitcoin should not be adopted as legal tender” by any country.

Following the approval of the Bitcoin Law, the financial institution recommended that the country’s authorities limit its scope to avoid greater risk.

In its analysis, the IMF indicated that the Chivo Wallet, created by the government, should “fully insure user funds, in dollars and bitcoins, through the separation and protection of reserve assets.”

The president of El Salvador Nayib Bukele responded to the International Monetary Fund (FMI) that he does not agree with his opinion on the risks of having adopted bitcoin as legal tender in the Central American country since last September 7.

The International Monetary Fund report published on Monday recommended that El Salvador “limit the scope of the Bitcoin Law” in the economy to avoid risks.

However, President Bukele only commented through his Twitter account that the report from the multilateral credit organization was “interesting” in terms of his analysis of the country.

“Obviously we do not agree on some things, such as the (risky) adoption of bitcoin,” replied the president, who has called himself CEO of El Salvador, downplaying the recommendation.

Following the adoption of bitcoin as legal tender, the government of El Salvador has been making a series of announcements about projects related to cryptocurrency. Last week Bukele announced the construction of the world’s first Bitcoin City.

In its periodic assessment of the country’s financial status, which is known as Article IV, the IMF acknowledged that the government of El Salvador is making a great effort to promote financial inclusion and attract investments to stimulate economic growth through cryptocurrencies.

But the body pointed out that “given the high volatility of bitcoin” in the market, its adoption as legal tender “involves great risks for consumer protection, the integrity of the financial system and financial stability.”

According to the IMF, “its use can also cause fiscal contingencies” and warned that “bitcoin should not be adopted as legal tender” by any country.

After the approval of the Bitcoin Law, the financial institution recommended that the authorities of the country limit its scope to avoid greater risks.

In its analysis, the IMF indicated that the Chivo Wallet created by the government should “fully insure user funds, in dollars and bitcoins, through the separation and protection of reserve assets.”

On the Flipside

  • President Bukele has previously ignored all recommendations made by governments and international credit organizations on the use of bitcoin. On the contrary, he has continued to make progress in attracting investments to develop cryptocurrency related projects.
  • “Our country is on the right track, otherwise there would be no investments of this type of technology,” he said.

El Salvador’s goal is to become the center of bitcoin mining activity in Latin America, as pointed out during the closing of Labitconf that brought together bitcoin experts and investors from around the world.

Why You Should Care

  • Since the initial announcement and the adoption of bitcoin as a legal tender, Bukele has received harsh criticism from a variety of national and international sectors.
  • Despite warnings about the risks of bitcoin, the IMF estimates that the Salvadoran economy will grow 10% this year, and another 3.2% in 2022.

On Tuesday the Presidential House expounded upon Bukele’s words about the expected economic growth this year:

“For the economy to grow and for all people to perceive it, one year of growth is not enough, we need years of growth. It is seen by everyone that our country now does have a vision and economic growth, a positive course,” President @nayibbukele.

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