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IMF urges El Salvador to take down Bitcoin’s legal tender status

IMF urges El Salvador to take down Bitcoin’s legal tender status
IMF urges El Salvador to take down Bitcoin’s legal tender status

The International Monetary Fund (IMF) has reportedly urged El Salvador to take away the legal tender status of the highly unstable cryptocurrency, Bitcoin, warning of the risks it poses to the country's financial stability. 

Last September, after the Legislative Assembly passed the Bitcoin law, El Salvador had become the first country in the world where consumers were allowed to use Bitcoin in all transactions, alongside the US dollar.

The decision, however, was met with large-scale protests as many feared that the use of Bitcoin will bring instability and inflation to the country.

Bitcoin, which had nearly doubled in its value when the law came into effect, has now fallen by around 45% of its peak value since November, speculated to have caused the country a loss of around $20 million.

In its statement, IMF highlighted the larger risks involved with the use of cryptocurrency in terms of financial stability, financial integrity, and consumer protection related, and with the issuance of Bitcoin-backed bonds.

The IMF has also warned President Nayib Bukele that it will become difficult for the institution to grant loans to the nation. Last year, El Salvador had sought a $1.3 billion IMF loan, however, talks were thwarted due to concerns around Bitcoin.

Meanwhile, to further facilitate the use of crypto in the country, the government released a digital wallet app and gave away $30 in Bitcoin to each citizen. Over 200 cash machines were also installed across the country, which meant that businesses everywhere had to accept the virtual currency as payment.

The move, which was supposed to improve economic development and jobs, has further divided the country on the adoption of Bitcoin instead.

in November, President Bukele, an active supporter of cryptocurrency, has become an icon among crypto users and had even announced plans to build a Bitcoin city near the base of a volcano in the country with the cryptocurrency used for funding the project.

Source credit: https://www.bbc.com/news/world-latin-america-60135552

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Vinisha Joshi

Vinisha Joshi

Despite graduating with an engineering degree in electronics and communication, Vinisha Joshi chose the road less travelled, and decided to pursue her career in content writing . Currently, she pens down articles for cuereport.com and a few other distinguished news platforms, pertaining to business and finance.