If bitcoin is legal tender, there are no loans: the IMF’s warning to El Salvador

On By Garmin Philip

In September of last year, El Salvador became the first country in the world to adopt bitcoin as legal tender, but this measure has had a mixed reception. While part of the cryptocurrency enthusiasts celebrated this milestone, another part of the citizens was against it. Now the International Monetary Fund (IMF) has said that the government of Nayib Bukele you should reverse part of your decision, citing possible risks of cryptocurrencies for financial stability.

The IMF’s position may be a problem for El Salvador. At the beginning of 2021, the country had started conversations to secure a $1.3 billion loan to revitalize its economy. However, the approval of the law that includes the adoption of the cryptocurrency was not well received by the financial institution, which at that time warned that there was the possibility of violating the laws against money laundering and the financing of terrorism.

However, President Nayib Bukele continued with his plan. El Salvador started buying bitcoin when it was trading around $50,000, but the price fluctuated wildly over the months. with his last purchase of 410 coins for 15 million dollars last Friday, the country adds more than 1,800. Nevertheless, according to Bloomberg, bitcoin is down nearly 50% since its November peak, so the El Slavador would have lost about 20 million dollars.

Given this situation, Nayib Bukele is located between a hybrid between the president of a country and a financial influencer in the crypto world. In your twitter profile introduces himself as the CEO of El Salvador and gives advice on how to invest in cryptocurrencies and even jokes about drops in value. After the latest crash of bitcoin, the president joked by changing his profile picture in which he posed as an employee of a fast food chain.

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As we have seen above, this Tuesday the board of the International Monetary Fund requested through a release “reduce the scope of bitcoin law by removing legal tender status” due to the great risks associated with its use in relation to “financial stability, financial integrity and consumer protection”. Nayib Bukel’s response on Twitter was a meme from The Simpsons in which the IMF is Homer trying to call the attention.

If you want my assistance, you must accept my conditions

The truth is that the IMF establishes a series of terms to countries seeking a loan. These include adjustments in economic policy that help “overcome the problems that led it to request financial assistance from the international community” and that serve to “guarantee that the country will be able to repay the resources.” But negotiations between El Salvador and the IMF seem stalled, even more so since the country think about issuing bonds in bitcoin.

The World Bank, for its part, turned down June 2021 provide assistance to El Salvador in the implementation of bitcoin. As an argument, the organization mentioned the concern for the transparency of the process and the environmental impact of mining.

For now, Nayib Bukele’s bold plan has turned El Salvador into the only testing laboratory in which bitcoin has the same validity as the US dollar, the country’s other legal currency. With his law, all businesses are obliged to accept it and promises to “generate jobs and help provide financial inclusion to thousands outside the formal economy.”

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Image | Salvador Presidential House

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Reference-www.xataka.com