The International Monetary Fund had tried urging El-Salvador to stop using bitcoin as a legal tender. The IMF said that the "high risk associated" with cryptocurrencies is the reason. The organization went on to release a statement with different reason that urge the country to ditch the currency. Many called this statement a set-back to El-Salvador, and cryptocurrencies in general.
El-Salvador's Adoption of Bitcoin
In the middle of last-year, El-Salvador shoot the world with an unexpected headline. The country became the first in the world to make bitcoin one of its legal tenders. The law adopting the cryptocurrency was voted in by most of the countries law-makers. Out of 84 votes, over 60 were in favor. After this law, the country was quick to adapt. Most stores in El-Salvador now accept bitcoin, with the country installing hundreds Bitcoin ATMs.
The IMF Responds
When El-Salvador first passed the law adopting the use of Bitcoin, many suspected that the IMF will not be happy. Surely, months later, the IMF made a statement against the countries adoption of the cryptocurrency. In a 144 page statement released by the organization, many bad claims were made about bitcoin.
The main point brought across by the IMF is related to the cryptocurrencies stability. According to the statement not only does bitcoin bring huge stability risks to an economy, but also to 'financial and market integrity. The report also says that consumer protection could also be at risk.
The IMF suggested that the best way forwards is by 'narrowing the Bitcoin law’s'. According to the statement, the simplest and most effective way to do it is by removing its legal tender status. According to the IMF, the country should also safeguard financial stability. The report says this can be done by adopting banking regulatory frameworks.
This report came hot as bitcoin just had a crash after its all time high price in 2021. After seeing a peak of $69,000 last year, bitcoin fell to as low as $30,000 in the beginning of 2022. What's interesting is that El-Salvador took advantage of the crash, purchasing 410 bitcoins. This is on top of their already existing stash of 1,500 bitcoins purchased by the governments treasury last year.
El-Salvador Responds to the IMF
After the report published by the IMF made headlines, El-Salvador was quick to respond to the situation. The government agreed that bitcoin regulation could be strengthened. Despite that, the removal of bitcoins legal tender status was rejected. The countries finance minister made a sharp statement on television. He said "No international organization is going to make us do anything, anything at all". Back in January, the country said that over 20 bills regulating the currency are being drafted.
Being the first country to adopt cryptocurrency as a legal tender, the world was shocked. This adoption gave great hope to cryptocurrency enthusiasts and proves that crypto can be the future of currencies. Despite all the backlash from organizations trying to protect traditional banking methods, El-Salvador does not seem whiling to back down. This is another great win for bitcoin and the whole cryptocurrency industry.