Economy & Business - February 2022

ECONOMIC HIGHLIGHTS

EL SALVADOR | IMF urges gov’t to remove bitcoin’s legal tender status. On 25 January the International Monetary Fund (IMF) urged El Salvador’s government led by President Nayib Bukele to “narrow the scope” of the legislation which took effect in September 2021 making the cryptocurrency bitcoin legal tender in El Salvador, by removing its legal tender status. The call came in a statement issued after an IMF Article IV consultation with El Salvador, which concluded on 24 January. The statement cites IMF directors as agreeing on the “importance of boosting financial inclusion and not[ing] that digital means of payment - such as the Chivo e-wallet - could play this role”. However, they emphasised the need for “strict regulation and oversight” of the new ecosystem of Chivo and bitcoin. They stressed that “there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities”. Some directors also “expressed concern over the risks associated with issuing bitcoin-backed bonds” which Bukele has indicated that he plans to do this year. The IMF’s latest comments raise further questions over the future of the US$1.3bn loan which the Bukele administration has said that it is seeking from the multilateral lender.

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