Narayan AmmachchiThe International Monetary Fund (IMF) has urged El Salvador to ditch Bitcoin as legal tender, cautioning that the cryptocurrency may put the country’s economic prospects at risk.
“The adoption of cryptocurrency entails large risks for financial and market integrity, financial stability, and consumer protection. It also can create contingent liabilities,” the fund said in a statement.
The fund has even expressed concern over the country’s plans to issue Bitcoin-backed bonds, emphasizing the need for strict regulation and oversight of the new financial ecosystem.
The statement came following two days of bilateral talks with the government in El Salvador, which is seeking 1.3 billion in loans to put its economy in order.
The Central American country became the first country in the world to adopt Bitcoin as the official currency.
El Salvador is already feeling suffocated under a mountain of debt. The IMF expects the country’s public debt to rise to about 96% of GDP in 2026.
Such a scenario will be hard to tame for countries such as El Salvador whose financial resources are very few.
At the meeting, IMF directors urged the government to “narrow the scope of the bitcoin laws” in order to help the country’s central bank to simplify fiscal monitoring.
Cryptocurrencies have a history of wild fluctuations and no central bank can regulate its price.
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