IMF again criticizes El Salvador for its bitcoin policy

What’s new? The International Monetary Fund (IMF) has again expressed dissatisfaction with the policy of El Salvador on bitcoin. The country’s authorities were the first in the world to recognize bitcoin as legal tender in 2021 and have been regularly investing state budget funds in the asset ever since. In previous years, the IMF in this regard has repeatedly warned El Salvador about the risks to financial stability and refused to provide a loan as long as the cryptocurrency retains its status in the state.

Material by Cointelegraph

What else is known? In August, El Salvador’s President Nayib Bukele admitted in an interview with TIME that the legalization of bitcoin has not been as successful as expected. He explained that so far, the digital asset has not yet become widespread in the country. Nevertheless, the country has seen an increase in tourist traffic and the economy as a whole.

Earlier this year, IMF officials admitted that their fears about the legalization of bitcoin in El Salvador “have not yet come to fruition.”

Nevertheless, at an October 3 press conference, the IMF reiterated its call for El Salvador to abandon its bitcoin policy and review the regulatory framework for digital assets.

Julie Kozak, the Director of the IMF’s Communications Department, did not elaborate on the details of the proposed regulatory changes, stating the following:

“What we have recommended is a narrowing of the scope of the Bitcoin Law, strengthening the regulatory framework and oversight of the Bitcoin ecosystem, and limiting public sector exposure to Bitcoin.”

Some states have begun to explore alternative asset options, including bitcoin, in the face of devaluation of the national currency. In 2023, the IMF held technical consultations with Andorra to help register and track bitcoin transactions. In March 2024, the IMF proposed that Pakistan impose a capital gains tax on cryptocurrency in order to qualify for a $3 billion loan.

Later, the IMF proposed taxing energy for mining to reduce carbon emissions, which could result in an 85% increase in resource costs for industry participants.

While the IMF continues to oppose bitcoin and cryptocurrencies not under government control, it is simultaneously promoting central bank digital currencies (CBDCs). In September, the IMF published its vision for CBDC development under the acronym REDI: Regulation, Education, Design and Incentives. It is designed to help central banks introduce national cryptocurrencies to all segments of the population.