IMF issues warning on El Salvador’s Bitcoin experiment amid calls for greater transparency

Bitcoin adoption in El Salvador has yet to recognize the risks originally predicted. However, greater transparency and caution are still needed. statement According to the International Monetary Fund (IMF), who visited the country on February 10.

“As research and remittance data suggest, the limited use of bitcoin to date has not materialized the risks, but the potential for its status as a fiat currency and tokenized bonds (digital assets) to Bitcoin use is likely to increase given new legislative changes to facilitate the use of crypto assets, including […]

Increased transparency over government bitcoin transactions and the financial status of state-owned bitcoin wallets (Chivo) is essential, especially to assess potential financial contingencies and counterparty risks. “

The IMF statement came after El Salvador paid out $600 million in bonds. last monthThis preceded the IMF’s “Article IV” visit, which took place from 30 January to 8 February.

It is the third visit by IMG since El Salvador decided to make Bitcoin legal tender in September 2021. Some of the major risks have so far been averted as El Salvador does not agree to adopt Bitcoin as a legal tender.

However, while some of the early risks of El Salvador adopting Bitcoin have not materialized, the Latin American country’s continued pursuit of a policy of its own monetary sovereignty, despite not having its own currency, is likely to continue. previously relied solely on the US dollar as legal tender).

“Issuing tokenized securities to finance Bitcoin purchases should be avoided due to financial risks.[…] The use of proceeds by New Bitcoin Fund Management is subject to regular spending controls and good governance practices. “

all this comes later El Salvador’s Congress passed a law regulating the issuance of digital assets by the state and private companies, passed on January 11. The law allows countries to sell bitcoin-backed government bonds, but the IMF has issued a warning against this.

In addition, El Salvador plans to use these bonds to build a “Bitcoin City” connected to the local volcano.Bukele’s grand vision is to use the energy of the volcano to create a clean It’s about mining bitcoins.

However, since his country accepted the cryptocurrency as legal tender and announced it would be the first to buy hundreds of bitcoins in September 2021, the country’s total bitcoin holdings have fallen 57% from its peak. increase.

Despite these concerns, the IMF, in its February 10 report, praised El Salvador’s economy for a “full recovery” to pre-pandemic levels. The IMF forecasts that the country’s real GDP will grow by 2.4% in 2023, above its historical average.

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