Three days after the Congress of El Salvador approved the official and mandatory use of the cryptocurrency bitcoin in the Central American country, the International Monetary Fund warned of the risks and assured that “in this context” the Fund team will meet with the president Nayib Bukele on Thursday. “The adoption of Bitcoin as a currency raises a series of macroeconomic, financial and legal issues that require very careful analysis,” said Gerry Rice, spokesman for the International Monetary Fund (IMF), at a press conference.
The Government of El Salvador is seeking approval for a loan to invest in what it considers a “golden opportunity” for the country to boost its economy after emerging from the pandemic. The amount and duration are negotiated between the parties and that process is currently underway, Rice said. In the middle of the process, Bukele sent Congress last weekend a bill that forces the country to offer bitcoin as a form of payment and banks to exchange debt in dollars, the currency that the country uses, for debt in bitcoin, a cryptocurrency without regulation or centralized authority. The United States has the largest decision stake in the IMF and the White House has warned of the cybersecurity and reliability risks of cryptocurrencies.
“The adoption of Bitcoin as legal tender raises a number of financial and legal macroeconomic issues that require very careful analysis,” Rice said. “We are closely monitoring developments and will continue to consult with the authorities. In this context, I can tell you that the IMF team will meet with the president of El Salvador today.
“What we have said generally is that crypto assets can carry significant risks,” so he suggested that there should be “effective regulatory measures,” Rice added.
Bukele announced the proposal on Saturday at a conference on bitcoin, the best-established cryptocurrency on the market, whose prices have soared during the covid-19 pandemic for offering attractive returns. Virtual currency does not have a central issuing bank, as most countries do, and is, in many cases, impossible to trace, which is why it is used as a ransom currency in cases of cyberattacks.
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