IMF refuses to issue a loan to El Salvador because of bitcoin use in the country

According to the fund’s representatives, the legalization of the asset as a legal tender threatens the financial stability of the state

18.10.2022 - 08:00

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What’s new? The International Monetary Fund (IMF) refused to grant El Salvador a $1,4 billion loan. During talks in Washington, the IMF representatives reiterated that a loan is impossible as long as bitcoin remains legal tender in the country, Infobae reports. In their view, the legalization of BTC threatens the financial stability of the state. From the Salvadoran side, the meeting was attended by a delegation led by the President of the Central Reserve Bank, Douglas Rodríguez.

News on the Infobae website

What other statements have been made? The loan from the IMF is designed to solve liquidity problems and repay El Salvador’s government bond debts. It has been under negotiation since the beginning of the year, but the IMF has cited financial, economic, and legal problems in accepting bitcoin.

Some board members also expressed concern about the risks associated with El Salvador’s pending issuance of bitcoin-linked bonds. In August, it was delayed again indefinitely due to the falling value of the asset. However, subject to the adoption of appropriate laws, the issue of bitcoin bonds could take place before the end of the year.

The fund believes that, given the high volatility of the value of BTC, its use as a legal tender carries risks for users, as well as the financial integrity and stability of El Salvador.

In September 2021, El Salvador became the first country in the world to adopt bitcoin as a legal tender. In July 2022, amid the global downturn in the crypto market, El Salvador added 80 BTC worth $1,52 million. The total amount of BTC on the country’s account as of October 18 is 2381 BTC (~$46,56 million, according to Binance). In this, the IMF repeatedly opposed bitcoin legalization in El Salvador.

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