The international financial institution is rehashing old warnings and reiterating that the recognition of Bitcoin as a national currency is an “inadvisable abbreviation”.
Bitcoin (BTC), the world’s largest cryptocurrency, will be introduced as legal tender in El Salvador in seven days. But while the Central American country goes through the final days of preparation and is eagerly watched by other countries – including potential copycats – the International Monetary Fund (IMF) is renewing its warning on Twitter.
Together with the World Bank, the intergovernmental financial institution has voiced its disapproval of El Salvador’s crypto legislation from the start. The IMF warns of the economic and legal risks that threaten the country if Bitcoin becomes official legal tender.
One step too far
The IMF in its recent IMF warning (which was posted on Twitter – with a link to last month’s blog):
“Privately issued crypto assets like Bitcoin are associated with significant risks. Equating them with a national currency is an inadvisable abbreviation. “
Privately issued cryptoassets like Bitcoin come with substantial risks. Making them equivalent to a national currency is an inadvisable shortcut. Read more in our #IMFBlog by the IMF’s Tobias Adrian and @RhodaWeeksBrown: https://t.co/r1NwBuyAq8 pic.twitter.com/Sk9tOjvhD6
– IMF (@IMFNews) August 29, 2021
The blog post, written by Tobias Adrian, Director of the Money and Capital Markets Department, and Rhoda Weeks-Brown, Head of the Legal Department, describes a number of “risks that threaten countries that choose to use privately issued tokens” as their national currency legalize.
The authors recognize the “advantages of the underlying technologies”. They insist, however, that cryptocurrencies should not be adopted to such an extent that it is a “step too far”.
In most cases, the risks of such an introduction would outweigh its benefits, the authors warn. They stress that the recognition of Bitcoin as the national currency poses a threat to financial integrity in countries with weak anti-money laundering and terrorist financing (AML / CFT) measures.
An “inadvisable shortcut”
While most of the blog is devoted to warnings of financial and legal risks associated with the introduction of Bitcoin, the authors also delve into the impending environmental and economic dangers.
Adrian and Weeks-Brown emphasize the negative environmental impact of Bitcoin mining. That would use “an enormous amount of electricity”. And they warn that the introduction of cryptocurrencies could jeopardize consumer protection and have a negative impact on domestic prices.
According to the IMF, the introduction of Bitcoin as the national currency is “a shortcut that is not recommended” for a way out of the economic crisis.
The introduction of Bitcoin can be a quick and effective solution for the currently troubled economies by eliminating the high cost of remittances, enabling the financial integration of citizens without bank details, attracting foreign investors and in some cases circumventing annoying sanctions.
El Salvador’s President Nayib Bukele, who brought the law through parliament in June, commented: He does not shed tears over the rejection of the IMF.
– Nayib Bukele 🇸🇻 (@nayibbukele) August 29, 2021
Following the IMF’s initial warnings, Bukele said nothing would stop the adoption of Bitcoin in El Salvador. And so far that’s true too.
Proof of text: Cryptoslate
Last updated on August 31, 2021
Top broker for buying and trading cryptocurrencies
- Buy real Bitcoin or Bitcoin CFDs
- Wallet and exchange in one
- 14+ cryptos
- Excellent trading tools
- Large knowledge and training database
- Very good spreads
Cryptocurrencies are a very volatile, unregulated investment product. Your capital is at risk.