IMF reassured about El Salvador’s financial future after introducing Bitcoin standard

The International Monetary Fund (IMF) was initially very concerned about El Salvador’s financial future after switching to a Bitcoin standard. We are now more than a year later and those risks are by no means manifest. This is because the use of Bitcoin in El Salvador is limited to date, according to the IMF.

Visit to El Salvador

Last week, a delegation from the IMF visited El Salvador to find out how the country is doing now. In a statement of Friday 10 February informs the powerful financial body that the limited use of Bitcoin means that the previously predicted risks have not materialized yet. However, it once again underscores the risks, which the IMF says could still materialize if Bitcoin use increases in El Salvador.

The IMF is also asking El Salvador to reconsider issuing Bitcoin-based government bonds. In the first place because of the legal risks involved, but certainly also because of the financial risks it entails. “Given the legal risks, fiscal fragility and speculative nature of the crypto market, authorities should review their plans to increase government exposure to Bitcoin,” the IMF said.

More transparency

In addition, the IMF wants El Salvador to be more transparent about both its own Bitcoin transactions and the financial situation of the government’s Chivo wallet. These IMF rulings come after the legal framework for Bitcoin-backed government bonds, also known as the “Volcano Bonds,” was approved on January 11.

The proceeds from the bond sale will be used to pay down its national debt and finance the construction of Bitcoin City, according to the government of El Salvador. This is a city that El Salvador wants to build to attract more crypto investors to the country.

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Guillerme Contreras, the CEO of DitoBanx, announced on Jan. 6 that the opening of the National Bitcoin Office in El Salvador will function as a “central entity” to deal with such issues. It will be interesting to see whether El Salvador will respond to the IMF’s recommendations at all.

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