El Salvador Rejects IMF’s Call for Dropping Bitcoin as Legal Tender

El Salvador’s government brushed away a suggestion from the International Monetary Fund on Monday to phase out Bitcoin as official currency in the Central American country. Treasury Minister Alejandro Zelaya asserted vehemently that “no global institution would compel us to undertake anything.” According to Zelaya, Bitcoin is a matter of “sovereignty.” “Countries are autonomous states that make their own public policy choices,” he said. The IMF suggested a week before that El Salvador liquidate the $150 million trust fund it established when it legalized bitcoin and refund any leftover cash to the country’s government.

The agency expressed worry about Bitcoin’s price fluctuations and the likelihood of fraudsters utilizing the cryptocurrency. Bitcoin’s value has plummeted after almost tripling in the final leg of 2021. El Salvador, Zelaya claimed, has adhered to all financial transaction and anti-money laundering regulations. The trust fund was created to facilitate the automated translation of Bitcoin to US dollars — El Salvador’s alternate currency — in order to reassure those skeptical of the notoriously risky bitcoin’s adoption. Additionally, the IMF suggested discontinuing the $30 bonus for individuals to begin utilize the digital wallet Chivo and boosting oversight of the crypto wallet to safeguard customers.

It stated that there may be advantages to utilizing Chivo, but only with dollars, not with Bitcoin. “In the short term, the real costs of adopting Chivo and operationalizing the Bitcoin legislation will outweigh the potential advantages,” the paper said. Salvadoran President Nayib Bukele has already dismissed the IMF’s Bitcoin suggestions. According to government authorities, the introduction of Chivo improved financial inclusion dramatically, bringing millions of individuals who earlier lacked bank accounts in the monetary system. Additionally, they discussed the alternative tourist marketing targeted towards Bitcoin fans.

As per a report, the government did not feel the need to constantly narrow the scope of the Bitcoin legislation, but agreed that regulation might be reinforced. Bukele spearheaded the campaign to get Bitcoin recognized as legal money beside the US dollar. In June, El Salvador’s Legislative Assembly became the first nation to do just that, and the Bitcoin legislation became active in September. For months, El Salvador and the IMF have been discussing a $1.3 billion loan.