IMF Urges El Salvador to Reduce Its Bitcoin Push | Technology
By CLAUDIA TORRENS – Associated Press
NEW YORK (AP) — The International Monetary Fund said Friday that El Salvador should dissolve the $150 million trust fund it created when it made the Bitcoin cryptocurrency legal tender and return all those funds unused to his treasury.
The recommendation was part of the international lender’s report on El Salvador’s economy and went beyond its statement earlier this week urging El Salvador to drop Bitcoin as legal tender.
The trust fund was intended to enable the automatic conversion of Bitcoin into US dollars – El Salvador’s other currency – to encourage hesitant people to adopt the highly volatile digital currency.
The IMF also recommended eliminating the $30 offer to entice people to start using the “Chivo” digital wallet and strengthening digital wallet regulation to protect consumers. He suggested there might be benefits to using Chivo, but only in dollars, not Bitcoin.
“In the short term, the actual costs of implementing Chivo and operationalizing the Bitcoin Law outweigh the potential benefits,” the report states.
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Salvadoran President Nayib Bukele’s office did not immediately respond to a request for comment, but in recent days Bukele has rejected IMF recommendations regarding Bitcoin.
The IMF expressed concern over El Salvador’s growing exposure to Bitcoin volatility and called for greater transparency.
Government officials told the IMF that the launch of “Chivo” had dramatically increased financial inclusion, drawing millions of people into the financial system who previously did not have bank accounts. They also talked about parallel tourism promotion targeting bitcoin enthusiasts.
The government has not seen a need to reduce the scope of its Bitcoin law, but the agreed regulations could be strengthened, according to the report.
Bukele led the push to adopt Bitcoin as legal tender alongside the US dollar. El Salvador’s Legislative Assembly made the country the first to do so in June, and the Bitcoin Law went into effect in September.
“What we highlight in the report is that having a digital wallet, which allows people to use digital payment methods and store their savings there, especially in US dollars, can bring benefits to the economy as well as growth, but again, I’m emphasizing the US dollar because the price of bitcoin is volatile,” said IMF mission chief Alina Carare. in El Salvador, during a call to reporters on Friday.
After nearly doubling in value at the end of last year, Bitcoin has taken a dive.
El Salvador and the IMF have been negotiating $1.3 billion in loans for months. Carare did not say whether the potential loan would be withheld if El Salvador continued to use Bitcoin as legal tender.
When asked, Carare said, “we continue to have strong engagement with the government of El Salvador.”
AP writer Marcos Alemán in San Salvador, El Salvador contributed to this report.
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