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Again, IMF raises concern over El Salvador Bitcoin adoption

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  • IMF expresses concern over El Salvador Bitcoin adoption.
  • Says Bitcoin should not be a legal tender in the Central American country.
  • Lists risks such as consumer protection, high volatility as reasons BTC should be frowned at.

Once again, The International Monetary Fund (IMF) has raised concerns over El Salvador’s Bitcoin adoption as legal tender.The world monetary body stated that the digital asset as a legal tender poses problems such as consumer protection, money laundering, and financial stability risks.

The world monetary body raised these issues in a concluding statement published on Monday. “El Salvador: Staff Concluding Statement of the 2021 Article IV Mission,’ the paper was titled.

The statement is a technical appraisal of El Salvador’s economy in 2021 by the IMF conducted at the end of an official mission to the Central American country. It aimed to evaluate the health of El Salvador’s economy and prepare a report to the IMF Executive Board based on the findings.

The team evaluated El Salvador’s Bitcoin adoption and the effectiveness of Chivo, a digital wallet that lets Salvadoran citizens make payments.

Bitcoin should not be a legal tender in El Salvador – International Monetary Fund

IMF in the paper categorically said Bitcoin “should not be used as a legal tender” in El Salvador.

“Given Bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability,” the IMF staff wrote. “Its use also gives rise to fiscal contingent liabilities. Because of those risks, Bitcoin should not be used as a legal tender.”

IMF positive assessment of El Salvador economy

In the review, an overview of El Salvador scorecard by the IMF shows that the country had a good 2021. The world monetary body held that El Salvador’s public health response to the pandemic helped save many lives, Pro-active policies helped cushion the 2020 economic contraction, and Supportive policies, buoyant external demand, and continuous growth in remittances are fueling a strong recovery.

IMF, however, notes that Under current policies, medium-term growth is expected to be constrained by high financing costs in the country, and Risks to the economic outlook in El Salvador are sizeable.

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