The International Monetary Fund (IMF) has urged El Salvador to drop bitcoin as legal tender, according to a statement on Tuesday.
The IMF emphasized that the use of Bitcoin carries significant risks in terms of financial stability, financial integrity, consumer protection and associated fiscal or related liabilities.
In September 2021, the Central American country El Salvador became the first country in the world to adopt Bitcoin as legal tender.
El Salvador’s President Nayib Bukele has tied his political future to bitcoin’s success — the country has bought hundreds of bitcoins in recent months. Just last Friday, the president announced on social media that he had bought another $15 million worth of “very cheap” bitcoin as the cryptocurrency market was plunging.
In its statement, the IMF also expressed concerns about El Salvador’s issuance of bitcoin bonds. Previously, El Salvador planned to raise $1 billion through so-called “Bitcoin Bonds” in partnership with digital asset infrastructure firm Blockstream.
In November, the IMF wrote in a report that bitcoin’s higher price volatility could be detrimental to consumers, noting that bitcoin is unsuitable as legal tender.
El Salvador has been working on a $1.3 billion loan from the IMF since 2021 — but both sides have split over the bitcoin debate.