IMF Urges Transparency in El Salvador’s Bitcoin Use
The International Monetary Fund (IMF) recently visited El Salvador and issued a statement regarding the country's adoption of Bitcoin.
Despite the lack of realized risks thus far, the IMF emphasized the need for increased transparency and attention toward the government’s use of cryptocurrency. They also stressed the importance of assessing the fiscal and counterparty risks associated with Bitcoin usage.
This was the third visit by the IMF since El Salvador made Bitcoin a legal tender in September 2021, a decision that was thought to have closed the doors to IMF financing.
Although some initial risks have not materialized, the IMF advised against the country’s pursuit of monetary sovereignty without its own currency. The organization also discouraged the issuance of tokenized securities for financing Bitcoin purchases due to financial risks and urged proper expenditure controls and governance practices to be followed.
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El Salvador recently passed a law regulating the issuance of digital assets by both state and private entities. The country plans to use these bonds, backed by Bitcoin, to build a “Bitcoin City” powered by a local volcano.
However, the IMF is cautious about this policy and advises against it. Despite these concerns, the IMF praised El Salvador’s economy for its full recovery to pre-pandemic levels and projects real GDP growth of 2.4 percent in 2023, above the historical average.