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El Salvador remains firm on Bitcoin, defying IMF’s renewed call to remove BTC as legal tender

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El Salvador has reaffirmed its commitment to adopting bitcoin, despite repeated calls from the International Monetary Fund for the country to abandon the cryptocurrency as legal tender. The Salvadoran vice president emphasized that not only will El Salvador’s bitcoin law be maintained, but that at this time the cryptocurrency also “enjoys the greatest credibility around the world.”

El Salvador remains firm on Bitcoin

El Salvador Vice President Félix Ulloa said in an interview with Reuters on Wednesday that bitcoin will remain legal tender in El Salvador during President Nayib Bukele’s second term, even after the International Monetary Fund (IMF) again urged the country to abandon cryptocurrency as legal. tender during negotiations for a billion dollar loan. On February 4th, general elections will be held in El Salvador to elect the president, vice-president and the 60 deputies of the Legislative Assembly.

Ulloa stated that the Salvadoran government has no intention of reversing the decision that gave legal tender to BTC. He noted that the recent approval of spot bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) has only strengthened his resolve. In September 2021, El Salvador became the first country in the world to establish bitcoin as legal tender alongside the US dollar. Ulloa said:

   Not only will (the law) remain... At this moment, it enjoys the greatest credibility in the entire world.

He explained that if President Bukele and his Nuevas Ideas party win a landslide victory in Sunday’s elections, the Salvadoran government will continue with its plans to launch bitcoin-backed bonds in the first quarter of 2024. Additionally, Ulloa confirmed that the construction of Bitcoin City, President Bukele’s proposed tax-free crypto haven in eastern El Salvador, would continue, along with issuing passports to investors who contributed $1 million in cryptocurrencies.

IMF Again Asks El Salvador to Reconsider Bitcoin as Legal Tender

Following the conclusion of the IMF Executive Board’s Article IV consultation with El Salvador, the Fund published a report on January 24 stating that the IMF Directors “agreed on the importance of promoting financial inclusion and “They pointed out that the methods of Digital payment, like the Chivo e-wallet, could play this role.”

However, the IMF highlighted that managers “emphasized the need for strict regulation and supervision of the new Chivo and bitcoin ecosystem.” The report adds that they also “emphasized that there are major risks associated with using bitcoin for financial stability, financial integrity and consumer protection, as well as the associated contingent tax liabilities,” noting:

   They urged authorities to reduce the scope of the Bitcoin law by removing its legal tender status.

The report further noted that some directors “expressed concerns about the risks associated with issuing bitcoin-backed securities.”

The IMF has repeatedly urged El Salvador to reconsider bitcoin as legal tender, starting with warnings in November 2021 and January 2022 about its risks and costs, followed by a detailed report in February 2023. Despite these warnings, El Salvador remained firm in his commitment. . for bitcoin.

This was not the first time that the IMF urged El Salvador to reconsider bitcoin as legal tender. Since November 2021, the Fund has repeatedly expressed concerns about the use of bitcoin as legal tender in El Salvador, issuing warnings in November 2021 about its risks, in January 2022 about its costs, and culminating in a detailed report outlining specific issues in February. 2023. After these warnings, El Salvador remains committed to bitcoin.

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