The IMF is urging El-Salvador to scale back its push for Bitcoin. While the government is not seeing a need, it agreed to strengthen regulation. This is what’s happening.
IMF insists El-Salvador scale down its Bitcoin push
On Friday, the International Monetary Fund (IMF) stated that El-Salvador should dissolve its $150 million trust fund and return unused funds to the treasury. The trust fund was first created when the nation made Bitcoin a legal tender. It was initially made for allowing automatic conversion of Bitcoin to the US Dollar. The US Dollar is the nation’s alternative currency that is encouraging people who are afraid of adopting a digital currency due to its highly volatile nature.
The IMF’s recommendation is part of its report on the country’s economy. The organization is also recommending El-Salvador stop offering a $30 incentive for people to start using Chivo, a digital wallet. The IMF believes that there is a benefit in using Chivo. However, only in dollars not for Bitcoin. “In the near-term, the actual costs of implementing Chivo and operationalizing the Bitcoin law exceed potential benefits,” stated the report. Nayib Bukele, th Salvadoran President did not respond with a comment. However, they have been dismissive of the IMF’s recommendation on matters related to cryptocurrency.
What is the government’s next move?
According to officials in El-Salvador, the launch of Chivo was significant in increasing financial inclusion. Reports suggest that it was successful in drawing millions of people into the financial system. The government is also thinking about parallel tourism that will be targetting Bitcoin enthusiasts. However, the government does not see the requirement for scaling back on Bitcoin.
“What we emphasize in the report is that having a digital wallet, that allows people to make digital means of payment and keep their savings there, especially in US dollars, can bring benefits to the economy as well as to growth but again, I’m emphasizing US dollar because Bitcoin has bitcoin price is volatile,” said Alina Carare. Carare is IMF mission’s head in El Salvador. moreover, the president leads the push for adopting Bitcoin as a legal tender along with the US Dollar. El-Salvador was the first country to push for it in June. The Bitcoin law came to effect in September 2021. Unfortunately, after almost doubling last year, the cryptocurrency plunged.