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IMF warns El Salvador of bitcoin ‘risks’

In September 2021, El Salvador became the first country in the world to accept bitcoin as legal tender, along with the US dollar, despite being asked to decline by the IMF. IMF experts warn that although the risks are not yet materialized due to the low volume of circulation, bitcoin could be used more in the future because it is a legal tender method and due to new regulatory reforms to encourage the use of crypto assets, including tokenized bonds.

The IMF stressed that “fundamental risks to financial integrity and stability, financial sustainability and consumer protection remain”. Given the regulatory risks, financial fragility and primarily speculative nature of the cryptocurrency market, the IMF recommends El Salvador authorities reconsider their plan to increase government exposure. with bitcoin, including the issuance of tokenized bonds.

According to the IMF, Salvador’s economy has grown by 2.8% in 2022 and since March last year has also recorded an unprecedented reduction in crime rates, while remittances and tourism revenues have increased, contributing to which creates a strong impetus for operations and investment. El Salvador’s average annual inflation in 2022 is 7.2%.

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