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January 26, 2022

The IMF Advises El Salvador to Remove Bitcoin as Official Currency

El Salvador, which became the first country to accept Bitcoin as legal tender (alongside the US dollar) in 2021, requested a $1.3 billion loan from the IMF last year, but the body is hesitant to hand over the funds due to its reservations about Bitcoin.

The IMF held one of its consultations last year, during which officials visited a country to compile an Article IV economic appraisal report for the executive board. IMF executive directors concurred with conclusions underlining the significant risks associated with the usage of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the accompanying fiscal contingent liabilities, according to a statement released Tuesday.

They encouraged El Salvador’s government to limit the reach of the Bitcoin law by removing the currency’s legal tender status, while other members “expressed worry about the risks connected with issuing Bitcoin-backed bonds.”

El Salvador’s Bitcoin law was passed in June of last year, and the cryptocurrency became legal tender in September—the same day BTC plummeted $10,000. The country has repeatedly ‘bought the dip’ when the price of Bitcoin falls, and it now has around 1,801 Bitcoin worth over $68 million.

El Salvador has remained committed to all things crypto, from its volcano-powered mining operation that yielded the country’s first currency in October to plans for a Bitcoin city with no income, property, capital gains, or payroll taxes, only a value added tax.

However, the country has met opposition to its ambitions. The World Bank has refused to assist in the deployment of Bitcoin, and some residents are wary about utilizing the digital currency.

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