The International Monetary Fund (IMF) has been urging El Salvador to make changes regarding its use of bitcoin since 2021 when the country first established it as legal tender. In its most recent statement, the IMF called for El Salvador to narrow the scope of the bitcoin law and enhance the regulatory framework and oversight of the bitcoin ecosystem.
During a press conference, IMF spokesperson Julie Kozack emphasized the need for El Salvador to limit public sector exposure to bitcoin. This recommendation comes as part of ongoing efforts to address potential risks and ensure transparency in the use of the cryptocurrency.
This is not the first time the IMF has expressed concerns about El Salvador’s approach to bitcoin. Back in August, the IMF highlighted the importance of enhancing transparency and mitigating potential fiscal and financial stability risks associated with the Bitcoin project. The IMF has consistently emphasized the need for further discussions and improvements in key areas related to the use of bitcoin in El Salvador.
The relationship between El Salvador and the IMF regarding bitcoin dates back several years. In November 2021, the IMF advised against using bitcoin as legal tender and called for stronger regulation and supervision of the cryptocurrency ecosystem. These recommendations were reiterated in January 2022, underscoring the importance of addressing regulatory and oversight challenges.
El Salvador made history by becoming the first country to adopt bitcoin as legal tender in September 2021. Currently, the country holds a significant amount of bitcoin, valued at approximately $345 million. Despite President Nayib Bukele’s efforts to promote bitcoin adoption, he has acknowledged that progress has not met his expectations.
In its recent assessment, the IMF commended El Salvador’s budget plans for 2025, which aim to achieve debt-free status. This positive outlook reflects ongoing efforts to address concerns raised by the IMF and strengthen the country’s financial stability and regulatory framework in the context of bitcoin adoption.
Overall, the IMF’s recommendations underscore the importance of balancing innovation with effective regulation to ensure the sustainable integration of bitcoin into El Salvador’s economy. By addressing regulatory challenges and enhancing oversight, El Salvador can navigate the complexities of using bitcoin as legal tender while promoting financial stability and transparency.
