El Salvador may abandon Bitcoin as legal tender at the request of the IMF

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El Salvador can stop using Bitcoin as legal tender — the initiative took effect in September 2021. The request is from the executive board of the International Monetary Fund (IMF), after discussions with the country, which is negotiating a loan of US$ 1 .3 billion.

According to the entity, the use of cryptocurrency can lead to financial risks and the creation of new liabilities. For the directors of the agency, in addition to the associated tax contingent liabilities, there are risks to financial stability, financial integrity and consumer protection.

Nayib Bukele, President of El Salvador, is a supporter of cryptocurrency, but the IMF demands that local authorities narrow the scope of the Bitcoin Act and remove the currency’s legal status. There is also concern about the risks associated with issuing Bitcoin-backed securities.

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In November, the IMF called on the country to strengthen regulation and oversight of the cryptocurrency payments ecosystem. In addition, it requested that El Salvador not use Bitcoin as legal tender.

The country has been hoarding the cryptocurrency — it recently bought 410 Bitcoin, which led to a total of 1,500 Bitcoin held by the country. For 2022, El Salvador plans $1 billion Bitcoin-backed government bonds. They will be denominated in US dollars and will last for 10 years.

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