Drop bitcoin as legal tender, IMF urges El Salvador

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The International Monetary Fund is pushing El Salvador to ditch bitcoin as legal tender, according to a statement released on Tuesday.

IMF directors «stressed that there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.»

The report, which was published after bilateral talks with El Salvador, went on to «urge» authorities to narrow the scope of its bitcoin law by removing bitcoin's status as legal money. In Sept. 2021, the Central American nation became the world's first country to adopt the cryptocurrency as legal tender, alongside the U.S. dollar.

Salvadoran President Nayib Bukele — who has tethered his political fate to the success of the country's bitcoin experiment — has added hundreds of bitcoin to the country's balance sheet in recent months. On Friday, the president tweeted that he bought another $15 million of «really cheap» bitcoin, as the crypto market plummeted. Bitcoin is down about 50% from its November record high.

The IMF report went on to say that some directors had expressed concern over the risks associated with issuing bitcoin-backed bonds, referring to the president's plan to raise $1 billion via a «Bitcoin Bond» in partnership with Blockstream, a digital assets infrastructure company.

Part of El Salvador's nationwide move into bitcoin also involved launching a national virtual wallet called Chivo that which offers no-fee transactions and allows for quick cross-border payments. For a country where 70% of citizens do not have access to traditional financial services, Chivo is meant to offer a convenient onramp for those who have never been a part of the banking