IMF Raises Legal and Economic Concerns With El Salvador Declaring Bitcoin As Legal Tender
Earlier this week on Tuesday, June 8, Latin American country of El Salvador became the first nation to pass the Bitcoin law and make Bitcoin a legal tender in the country. Once the law comes into execution within the next ninety days, merchants can start accepting Bitcoin payments officially against their goods and services.
However, the International Monetary Fund (IMF) has raised legal and economic concerns with respect to this move. During a briefing on Thursday, June 10, IMF spokesperson Gerry Rice said that the organization has been in talks with the Salvadorian lawmakers ahead this week.
Rice said: “Adoption of Bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis so we are following developments closely and will continue our consultation with authorities. Crypto assets can pose significant risks and effective regulatory measures are very important when dealing with them.”
Rice also noted that the IMF officials shall be meeting El Salvador President Nayib Bukele very soon to discuss the adoption of the leading cryptocurrency. Besides, IMF is also discussing a potential credit program and a loan of $1 billion to support El Salvador’s economy.
The IMF spokesperson also said that since digital assets pose significant risks some of the necessary regulatory measures are necessary while dealing with the new asset class. Despite the new Bitcoin law, the USD continues to be the legal tender of the Latin American nation in parallel.
However, Bukele said that Bitcoin will serve as a potential means for its citizens staying abroad and sending money back to their home country. Also, the use of Bitcoin is optional for its citizens said President Bukele.
The adoption of Bitcoin by El Salvador is seen as a historic move by many Bitcoin proponents. With El Salvador taking the lead, lawmakers of several other Latin American nations like Mexico, Paraguay, Panama, Brazil, and Argentina, have shown interest in adopting Bitcoin.
The COVID-19 pandemic has left the economy of several of these nations tumbling downwards. With massive USD printing by the Federal Reserve and rate of dollar going down the countries have been feeling the pinch.
Countries like Argentina and Brazil have been facing severe rise in inflation and it citizens have been adopting cryptocurrencies like Bitcoin to protect capital.