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The IMF calls on El Salvador to strip Bitcoin of its status as an official currency

The International Monetary Fund called on the authorities of El Salvador to reverse the decision to recognize Bitcoin as an official means of payment, effective from September 2021. RBC writes about this with reference to the organization’s statement.

The position of the IMF

IMF representatives held consultations with the country’s authorities regarding the economic situation there, the organization said in a statement.

“There are major risks to financial stability, financial integrity and consumer protection associated with the use of bitcoin,” the fund’s Executive Board members said.

They pointed out that El Salvador is recovering quickly from the damage caused by the pandemic, and that digital payments and an e-wallet have promoted financial inclusion. At the same time, the IMF expressed concern about the risks associated with the country’s plans to issue $1 billion in bitcoin-backed bonds.

Bitcoin in El Salvador

On January 22, Salvadoran President Nayib Bukele announced the government’s purchase of 410 bitcoins worth $15 million. At the moment, the country’s government holds 1.69 thousand BTC with a total value of $63.2 million, according to Bitcoin Treasuries.

The country is building up its bitcoin reserves

This is not the first time that El Salvador has “bought out the failure” of the first cryptocurrency. The country previously purchased 21 bitcoins on December 21 “to celebrate the last 21 days of the 21st year of the 21st century.”

The government’s actions were criticized by Moody’s rating agency. The agency believes that they contribute to the weakening of the country’s already low credit rating and indicate that defaults are on the rise.