Topline
The International Monetary Fund’s board again urged El Salvador to reverse its decision to make bitcoin legal tender in the country, pointing to financial risks tied to the leading cryptocurrency, it said in a statement Tuesday.
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Key Facts
El Salvador should “narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status,” the executive directors said in a statement, citing the cryptocurrency’s risks to “financial stability, financial integrity, and consumer protection.”
El Salvador became the first and only country to adopt bitcoin as legal tender in September alongside the U.S. dollar.
El Salvador last year applied to the IMF for a $1.3 billion loan, but bitcoin’s legal tender status is among issues that have gotten in the way of further discussions, which derailed last year amid concerns over President Nayib Bukele’s governance of the country.
Bitcoin is the No.1 cryptocurrency by market capitalization, followed by Ethereum and Tether, according to Coin Gecko.
Key Background
El Salvador began purchasing bitcoin last year when it was trading at around $50,000 per token, and Bloomberg estimates the country has bought at least 1,801 coins. Most recently that country purchased 410 bitcoin for $15 million last Friday. Bitcoin has fallen nearly 50% since its peak in early November, which puts El Salvador’s loss at about $20 million, according to Bloomberg. The leading cryptocurrency was trading at $36,671 on Tuesday afternoon, a slight rise from Saturday when it fell below $35,000 and marked its lowest level since July. Bukele’s adoption of bitcoin was met with widespread protests as Salvadorans complained it would benefit investors and not regular people in the country, where nearly half of the population does not have internet access.
Further Reading
Ditch Bitcoin: IMF Urges El Salvador Rethink on Crypto (Bloomberg)
IMF urged El Salvador to remove bitcoin’s legal tender status (Reuters)
Bitcoin Falls Below $35,000 As Selloff Nears 50% From Record High (Forbes)
