Thursday, 27 January 2022 15:26

The IMF asks the Government of El Salvador to eliminate Bitcoin as legal tender

Written by Evelyn Alas

The International Monetary Fund (IMF), asked the Central Government to eliminate Bitcoin as legal tender in the country due to the "serious risks" it implies for the market and financial stability. The body also showed its concern about the issuance of bonds backed by the cryptocurrency.

The price of Bitcoin continues in free fall during the first weeks of the year. According to a US media outlet, its value in the combined cryptocurrency market has dropped by US$1,500 since last november 2021. El Salvador, a pioneer country in accepting Bitcoin as legal tender, could face a problem if its value continues to fall.

The organization also called for a strict regulation of the electronic wallet of this type of currency.

Recently, Finance minister Alejandro Zelaya announced that the Central American country would issue bitcoin bonds between february and march. The total issuance of bitcoin bonds would be valued at US$1 billion. An operation with which they hope to attract the attention of investors and build the so-called "Bitcoin City", presented by President Nayib Bukele last november 21.

However, the IMF sees a high risk in the operation. In its communiqué, the agency warned that, at current debt spending levels, El Salvador's public debt could rise to about 96% of GDP by 2026, a fact it described as an "unsustainable trajectory".