The International Monetary Fund acknowledges that the underlying technology of crypto-assets is robust, but they allege there is no legal issuer. IMF spokesman Gerry Rice believes that the adoption of Bitcoin as a national currency poses macroeconomic risks.

In recent days, the International Monetary Fund (IMF) warned of the potential negative consequences of adopting Bitcoin as legal tender. Economists Tobias Adrian and Rhoda Weeks-Brown specifically argued that this could lead to macroeconomic instability.

Adrian and Weeks-Brown note that a cryptocurrency like Bitcoin can become popular in countries without inflation or stable exchange rates. They said the cost to the economy could be considerable even if it provides the unbanked with the means to make payments.

Additionally, they believe that companies would have to invest a lot of money to integrate a cryptocurrency instead of focusing on production.

The IMF comments on its blog that the consequences of countries adopting Bitcoin as a national currency could be disastrous. On that website, the organization’s staff and officials discuss current urgent economic and political issues.

Although their position on the issue is official, they do not mention any particular country.

Risks the Adoption of Bitcoin Poses, According to the IMF

The adoption of Bitcoin can lead prices to fluctuate due to the volatility of the cryptocurrency. For that reason, Tobias Adrian and Rhoda Weeks-Brown mentioned the widespread crime and fraud occurring in the cryptocurrency market.

The economists said that homes and businesses could lose wealth due to significant changes in value, fraud, or cyberattacks. Although the underlying technology of crypto-assets has proven robust, they explained that there might be technical flaws. In the case of Bitcoin, they argued that recourse is difficult as there is no legal issuer.

Adrian and Weeks-Brown spoke about adopting cryptocurrencies as national currencies or legal tender. The IMF officials believe there is a risk that domestic prices will become very volatile.

They also believe that some people could use those assets contrary to anti-money laundering and terrorism financing measures. Likewise, they argued that Bitcoin could cause problems related to macroeconomic stability and the environment.

The blog post does not explicitly mention El Salvador, but Adrian and Weeks-Brown do not recommend converting Bitcoin into a national currency. They believe that it is not the best solution for those seeking more inclusive financial services.

El Salvador is the First Country to Adopt BTC as Legal Tender

El Salvador became the first country to adopt BTC as its official currency alongside the US dollar. Although the IMF is negotiating a loan of USD 1 billion for that Central American country, it was quick to criticize the measure.

For his part, President Nayib Bukele has promoted its use as it can help Salvadorans living abroad to send remittances to their families.

According to IMF spokesman Gerry Rice, the adoption of Bitcoin as legal tender raises many macroeconomic questions. In addition to financial and legal aspects requiring careful analysis, he said they are closely following developments and consulting with the authorities.

Various organizations still link Bitcoin to illegal activities such as money laundering and terrorism financing due to its anonymous and decentralized nature. Several studies have shown that illicit activities with fiat money are more common than those with cryptocurrencies.

By Alexander Salazar

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