IMF Urges El Salvador to Revoke Bitcoin Legal Tender Adoption

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The International Monetary Fund (IMF) has once again urged El Salvador to revoke the adoption of the cryptocurrency Bitcoin as legal tender. El Salvador, which recently invested public funds directly into Bitcoin, is reported to have suffered significant losses due to the sharp decline in Bitcoin prices.

On the 25th (local time), the IMF stated in the results of its board meeting concerning El Salvador, "IMF directors emphasized the significant risks related to El Salvador's use of Bitcoin, including concerns about fiscal stability and soundness, consumer protection, and contingent liabilities," adding, "The IMF board urged the authorities of El Salvador to remove Bitcoin's status as legal tender and to reduce the scope of Bitcoin-related laws."

El Salvador, where the US dollar is used as the official currency, became the first country in the world to grant Bitcoin legal tender status in September last year. One of the reasons for adopting Bitcoin as legal tender was that it would allow immigrants to send remittances to their home countries more cheaply and conveniently.

In particular, Nayib Bukele (40), the current president of El Salvador, who has been actively investing in Bitcoin, later announced plans for Bitcoin mining using volcanic geothermal energy, the construction of a Bitcoin city, and the issuance of $1 billion worth of Bitcoin bonds. However, the IMF has consistently expressed a negative stance on the use of Bitcoin as legal tender since El Salvador announced its plan to adopt Bitcoin as legal tender in July last year.

Although there was significant public opposition to the circulation of Bitcoin within El Salvador, the government, led by President Bukele, purchased more than 1,800 Bitcoins directly by injecting public funds on several occasions.

However, as Bitcoin prices have continued to plunge recently, the scale of fiscal losses has been growing like a snowball. According to Bloomberg News, El Salvador's Bitcoin investment is estimated to have an unrealized loss of about $20 million (approximately 24 billion KRW).