SAN SALVADOR, El Salvador: The International Monetary Fund wants El Salvador to drop the highly volatile cryptocurrency Bitcoin as legal tender and strictly regulate the electronic wallet that the government has adopted across the country.
The council of global lenders urged authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status, the IMF said in a statement on Tuesday.
However, the adoption of a cryptocurrency as legal tender poses significant risks to financial and market integrity, financial stability and consumer protection, the IMF statement said.
President Nayib Bukele led the push to use Bitcoin as legal tender alongside the US dollar. El Salvador’s legislative assembly made the country the first to do so in June.
After nearly doubling in value late last year, Bitcoin has fallen and was slightly lower on Tuesday than when Congress voted on June 9. The Bitcoin law came into effect in September.
From the outset, there were concerns that a digital currency created to be outside the control of governments would attract criminal activity. Bukele promoted the adoption as a way for thousands of Salvadorans to avoid money transfer fees when relatives living outside the country transfer money.
El Salvador’s law called for all companies with the technological capability to accept Bitcoin as payment. The rollout was glitchy, but seems to have ironed out.
Bukele became a darling of cryptocurrency promoters and has since talked about building a Bitcoin city and issuing Bitcoin-backed bonds, something else that some IMF directors have expressed concern about.
Bukeles’ office said it did not immediately comment on the IMF statement.
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