The IMF says that it is closely following the events that are taking place in El Salvador. According to the representative of the international agency, “crypto assets can pose significant risks.”
Gerry Rice, a spokesman for the International Monetary Fund (IMF), recently spoke about the adoption of Bitcoin as legal tender. He argued that the legalization of the cryptocurrency “poses a series of macroeconomic, financial and legal problems.” He referred to the law that El Salvador recently passed, recognizing the first cryptocurrency as legal tender in that nation.
The official told Reuters that they are “closely monitoring developments and [will continue their] consultations with the authorities.”
The spokesperson for the financial agency considers that “crypto assets can pose significant risks.” For that reason, he argues that effective regulatory measures are very important. In that sense, Rice said that the IMF will meet with Bukele to discuss the law on Bitcoin (BTC).
Alina Carare, the IMF’s chief of mission for El Salvador, similarly addressed the matter. She said that they are “following the news and will have more information as the consultations with the authorities continue.”
El Salvador enacts the law on Bitcoin while they conduct negotiations with the IMF, seeking a program of almost USD 1 billion.
The Legalization of Bitcoin Could Hurt the Relationship with the United States
Some people fear that making Bitcoin legal tender may undermine the dialogue between El Salvador and the IMF. For example, Donato Guarino, an executive at Citibank, sees “the Bitcoin headlines in El Salvador as noise that could complicate discussions.”
According to some analysts, the decision could also affect El Salvador’s international relations. For example, Vlad Costea believes that this is “an experiment that is going to end badly.”
A sector of the Salvadoran press, which opposes President Bukele’s management, gave its opinion on the matter. They consider that the recognition of BTC as legal tender could harm the relationship with the United States. They believe it unlikely that the Joe Biden administration is unaware that such an indebted Latin American country uses the US dollar less than before.”
The IMF Calls for International Cooperation to Regulate Bitcoin
The International Monetary Fund has already expressed its views on Satoshi Nakamoto’s cryptocurrency on other occasions. In 2018, the international entity stated that cryptocurrencies can play an important role in the international economy. They said that they “can completely change the way to sell, buy, save, invest, and pay bills.”
Given the relevance of Bitcoin in the financial sphere, the organization called for international cooperation to regulate its use.
Two months ago, IMF chief economist Gita Gopinath ruled out the possibility that BTC was a competitor for legal tender. El Salvador’s recent decision seems to have refuted her words.
“Legal tender needs to have a stable value. Therefore, I would say that many of the existing cryptocurrencies cannot even fit the definition of money. Cryptocurrencies are very speculative investment assets, which is fine,” said Gopinath.
By Alexander Salazar