The International Monetary Fund (IMF) is definitely struggling with El Salvador’s choice to make Bitcoin an official currency alongside the US dollar. In one communicated released on January 25 as part of the board’s discussion of El Salvador’s annual economic assessment, the international organization again called on the country to back off on the decision.
Bitcoin Volatility Fuels IMF Mistrust
For the IMF, the adoption in September 2021 of Bitcoin as the official currency, the only country in the world to have gone so far, is very worrying. The organization believes that ” The adoption of a cryptocurrency as legal tender carries great risks for the financial integrity of the market, financial stability and consumer protection. “.
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This position is not new, like the World Bank which refused to help El Salvador to make Bitcoin an official currency, the IMF has done everything to put a spoke in the wheels of the projects of the president of the country. , Nayib Bukele. The request for a $1.3 billion loan from the institution is said to be blocked because of the cryptocurrency.
In November, the institution pointed to the high volatility of Bitcoin to encourage El Salvador to give up cryptocurrency. We have to admit that current events have proven the institution right. El Salvador started acquiring Bitcoin in 2021, around 1801, when its value was at $50,000. After peaking near $70,000 in November, the price fell 45%. According to the calculations of Bloomberg, El Salvador lost nearly $20 million.
It takes more to convince Nayib Bukele to give up. On Twitter, the 40-year-old president announced on January 21 that he had acquired 410 new Bitcoins for $15 million, in order to take advantage of the drop in value. An operation described as cheap by Nayib Bukele who linked the success of his policy to his decision to recognize Bitcoin.
Nope, I was wrong, didn’t miss it.
El Salvador just bought 410 #bitcoin for only 15 million dollars ?
Some guys are selling really cheap ??♂️ https://t.co/vEUEzp5UdU
— Nayib Bukele ?? (@nayibbukele) January 21, 2022
Some IMF directors also said concerned about the risks of issuing bitcoin-backed bonds “. El Salvador plans to raise $1 billion in “ bitcoin bond with help from Blockstream, a digital asset company.
All is not so bad in El Salvador
However, the IMF notes some good points in the innovations made by the Salvadoran president. Chivo, a digital wallet adopted in June 2021, in anticipation of the formalization of Bitcoin, is seen as a good thing, “ Directors agree on the importance of driving financial inclusion and note that digital means of payment, such as the Chivo e-wallet, could play this role “.
It allows 70% of Salvadorans excluded from the banking system to access financial services. Free payment and the speed of cross-border payments are also a strong argument: 24% of the country’s GDP is based on money transfers from its diaspora.
CNBC however points to numerous complaints of identity theft. To promote Chivo, the government of El Salvador decided to offer $30 in Bitcoin to open an account. Something to whet the appetite. On this point, the IMF asks the government to put in place strict regulations to ensure the security of the system. The institution may have more chance of being heard on this point than on its exhortations to abandon Bitcoin.