El Salvador’s Adoption of Bitcoin: IMF Opinion
The expected risks associated with El Salvador’s adoption of Bitcoin have not materialized, according to an annual study by the International Monetary Fund (IMF). The IMF did, however, issue a cautionary warning.
IMF Calls on El Salvador to Use Cryptocurrency With Care
The IMF urged the Central American country to reexamine its initiatives to boost bitcoin adoption. The government should rethink its intentions to increase its exposure to Bitcoin in light of the legal dangers, unstable financial conditions, and mostly speculative character of the cryptocurrency market. The IMF recommended that the government adhere to consistent budgetary restrictions and good governance principles and that the protections offered by the Digital Asset Law be similar to those of conventional securities rules.
El Salvador’s economy is recovering despite investments in bitcoin.
El Salvador’s economy has rebounded to pre-pandemic levels despite paper losses on its Bitcoin investments estimated to be at least 50%, according to the IMF. To analyze fiscal contingencies and counterparty risks, more information on the government’s Bitcoin transactions and the financial standing of the state-owned Bitcoin wallet (Chivo) is required.
Due to the lack of openness around El Salvador’s Bitcoin purchases and ownership, it is significant to emphasize that actual investment data are unclear. The IMF advises potential investors to conduct extensive study before choosing a position.