The International Monetary Fund has warned El Salvador not to use Bitcoin as legal tender currency due to the risks involved in cryptocurrencies. The warning came one day after Nayib Bukele, Salvadoran President of Bitcoin. Announced his intention to build a Bitcoin metropolis powered and funded with Bitcoin bonds.
According to the IMF El Salvador should not use Bitcoin for Legal Tender
Mr. Bukele spoke to a crowd of about 40 people at a Bitcoin promotion in Mizata on Saturday night. He said that the proposed new metropolis would have “everything”. Business areas, residential areas, and entertainment areas are all committed to Bitcoin.
On stage, the president, who was sporting a baseball cap backward, announced that the city would have no income taxes, but only a Value-Added Tax (VAT). On Monday, the International Monetary Fund urged El Salvador to stop using Bitcoin as legal money. This was due to the multiple dangers that cryptocurrency can pose.
El Salvador is now the first country to accept Bitcoin in legal money. This is in addition to its US dollar which it has used for more than two decades. The country’s Bitcoin law became effective in September. According to President Nayib Bakele of El Salvador, El Salvador has also purchased 1,120 Bitcoins. IMF before they can request to use IMF resources. The IMF stated that the IMF also considered the acceptance of Bitcoin as legal tender, regulation and supervision for Bitcoin service providers, and the ewallet Chivo.
In its “Staff Concluding Statement for the 2021 Article IV mission” for El Salvador Bitcoin, the IMF addressed the following: “Given Bitcoin’s volatility, its use in legal tender poses significant risks to financial integrity and consumer protection. It also creates fiscal contingent liabilities.
The IMF advised El Salvador then to “limit Bitcoin’s scope” as well as to improve “regulation and supervision of new payment ecosystem.” This announcement came one day after President Bukele had announced plans for the creation of the world’s first Bitcoin city, which will be powered by a volcano and funded using Bitcoin bonds. Except for the value added tax, there won’t be any taxes in Bitcoin City, he stated (VAT).
"The intention to issue sovereign debt and use the profits for bitcoin purchases and infrastructure funding plans was revealed on November 20, after the mission's technological work was finished," confirmed the IMF.