According to the global reports, one country is looking to make bitcoin legal tender against the advice of the International Monetary Fund (IMF). It is all because of the increasing trend of cryptocurrency in the market and its widespread popularity. The President of El Salvador believes that bitcoin will open new doors towards strengthening the country’s economic conditions.
Many countries are facing backwardness because of the lower investments at a global level. However, the President of El Salvador says that bitcoins as a legal tender will support the country’s financial system. And that it will increase the speed of growth to prepare itself for the future.
Previous to the recent news, it was merely a rumour that El Salvador would make bitcoin legal until its President announced it in the bitcoin event week when it became official. However, the authorities from the IMF are not in favour of El Salvador legalising bitcoin.
In an interview, the IMF authorities said that it is not suitable for El Salvador to make bitcoin and use it as a legal tender. They also said that the country must narrow down the scope of bitcoins and impose laws on their uses on crypto trader. Stating it also needed to strengthen the regulations that will supervise the movement and use of bitcoin inside and outside the country’s geographical boundaries.
Furthermore, the IMF authorities also said that bitcoin is subjected to a high degree of price volatility. Because of this, using it as a legal tender will have a lot of significant risks. Some of the most prominent reasons in the statement given were consumer protection, financial instability and In balance in financial integrity.
The IMF authorities disclosed their views about El Salvador accepting bitcoins as a legal tender in the statement given on the 2021 article 4 mission to El Salvador. They said that the use of bitcoins as a legal tender would create a lot of fiscal contingent liabilities for the country.
Before the IMF approves any request that El Salvador use bitcoin as a legal tender, the authority must consult with the member countries. Governing bodies involved in accepting bitcoins as a legal tender in El Salvador must regularly go to the IMF article 4 missions. There are certain risks enlisted by the IMF which can lead to the downfall of the economy of El Salvador. Authorities are concerned because it may not only pose a threat to the financial stability of El Salvador but the whole world.
Recently, in September, the President of El Salvador announced making bitcoin a permissible tender in the country. Following this, it is said that the country will be using the United States dollar alongside the bitcoin so that it can be exposed to more excellent prospects of stability and growth. However, IMF staff and authorities are against the views held by the President of El Salvador.
They say that bitcoin is very volatile, and its prices keep on changing. Therefore, it says that El Salvador needs to narrow down the scope of bitcoin loss. Also, it should revise rules and regulations to supervise the new payment ecosystem in a better way and with strict rules.
IMF gave their response to the news on bitcoin right after two days of the announcements made by the President of El Salvador. In the announcement, the El Salvador President also said that he is looking forward to building the worlds first bitcoin city. The bitcoin city is going to be initially funded by bitcoin bonds of US$1 billion. Initially, the authorities were also worried about the power supply required for this bitcoin city. However, the President clarified that the city would be getting its own energy supply from the volcano by which the city will exist. He also announced there will be only a few taxes that the people in the city will have to pay.
In the views of El Salvador’s President, the acceptance of bitcoin as a legal tender will bring a lot of investment, financial inclusion, development and tourism into the country. In addition, the bitcoin city will promote the growth and development of the ecosystem and payment system of the country. To reply to the IMF, the President of El Salvador said that even though he was also against accepting bitcoin as a legal tender, now, he sees acceptance of bitcoin as a means to make their country even more enjoyable.
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