The International Monetary Fund (IMF) warned countries on adopting cryptocurrencies as legal tender in a blog post published last July 26. While it did not mention a specific country, it indirectly referred to El Salvador’s plan of adopting Bitcoin into one of its national currencies.
‘Some countries may be tempted by a shortcut: adopting crypto assets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits,’ the blog post stated.
The Washington-based financial institution further emphasized that cryptocurrencies can potentially damage monetary integrity. They believe that digital assets are associated with money laundering and the funding of terrorist attacks.
The warning also suggested that El Salvador President Nayib Bukele’s loan of $1,000,000,000 could result in complicated relations with foreign countries and banking institutions.
On September 7, El Salvador is officially making Bitcoin a legal tender that can be used to pay for all kinds of goods and services. Bukele stated that ‘this decision is done for the benefit of the people’.
However, the IMF expressed their disapproval of the plan, saying that it’s ‘a step too far’. Moreover, the World Bank has declined to offer help in El Salvador’s Bitcoin launch, expressing concerns over the detrimental impacts this change could bring.
In an email addressed to news agency Reuters, a World Bank spokesperson explained that, ‘while the government did approach us for assistance on Bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings’.
Consequently, this change in the financial system has left the country’s financial sectors and citizens confused. However, the proponents remain excited about it, saying, ‘Crypto is not just a fad. It’s here to stay.’
The plan is first implemented on the crypto coast of El Salvador named Bitcoin Beach where Bitcoin is used for transactions. The president also said that he plans to leverage El Salvador’s ample geothermal resources to generate Bitcoin blocks.
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