IMF warns El Salvador of Bitcoin ‘risks’ – DW – 02/11/2023
The International Monetary Fund has urged the government of El Salvador to exercise greater transparency with its Bitcoin transactions, highlighting the cryptocurrency’s “risks.”
In September 2021, El Salvador became the first country worldwide to introduce Bitcoin as a legal tender alongside the US dollar. El Salvador’s Congress passed a law last month to regulate the issuance of other digital assets by the state and private entities.
In a report on Friday, the IMF once again warned the government regarding Bitcoin after a visit to the country.
“Although risks have not materialized due to the limited use of bitcoin so far,” the IMF report said, the use of the cryptocurrency could grow, given new legal reforms enacted to encourage its use.
The IMF noted that “underlying risks to financial integrity and stability, fiscal sustainability and consumer protection persist.”
How Has El Salvador Embraced Bitcoin?
President Nayub Bukele, known to be a technology enthusiast, is trying to get more of the country’s citizens to use traceable ways to exchange goods and money. Many Salvadorans do not have bank accounts.
The country rolled out a digital wallet, called Chivo, in September 2021, in parallel with adopting Bitcoin as a legal currency. Many Salvadorans have since protested the move and Bukele’s policies in general.
Bukele then announced last November that the country’s treasury would start buying one Bitcoin every day.
The Reuters news agency has calculated that nearly 2,470 coins were acquired by authorities for around $106.4 million (€99.4 million) since the announcement. The Salvadoran government does not officially disclose purchases, holdings or where the coins are kept.
In its statement, the IMF emphasized the importance of “greater transparency over the government’s transactions in Bitcoin and the financial situation of the state-owned Bitcoin wallet (Chivo).”
Despite the warnings, the IMF report applauded the growth of Salvador’s economy by 2.8% in 2022. It cited the government’s effective pandemic response, the “unprecedented” crime reduction and strong tourism revenues as reasons.
At the same time, IMF officials warned that Salvadoran exports and remittances could be affected by a pronounced slowdown in the United States.
rmt/dj (AFP, Reuters)
