10 Jun IMF sounds ‘legal, economic’ alarms over El Salvador’s Bitcoin adoption
The International Monetary Fund has sounded a warning that cryptocurrencies such as Bitcoin could threaten global financial stability – the same day the central bank of El Salvador announced a plan to start accepting the digital currency. Dismissing the currency as “inherently unstable”, IMF chief Christine Lagarde said the IMF is “concerned” about the growing popularity of digital currencies, which are not backed by any central bank and are not regulated by any government.
Standardization is the ultimate goal of an international currency. A standard currency is one that all parties in an economy agree to use, and the development of a global currency is the ultimate goal of the International Monetary Fund. But it seems the IMF is less interested in currency and more interested in the blockchain that underlies cryptocurrencies.
El Salvador has become the second country in the world to adopt Bitcoin as a means of payment, following Ecuador’s decision to do so in February this year. However, this move is raising eyebrows from the international body. The International Monetary Fund (IMF) issued a warning about the risks of cryptocurrency in a report released on Wednesday, saying that cryptocurrencies such as Bitcoin and Ethereum are “highly volatile, [and] can be used to launder money and finance crime.”The International Monetary Fund (IMF), the global intergovernmental economic and financial body, has condemned El Salvador’s decision to allow bitcoin as an official legal currency in the country, citing economic and legal risks. The introduction of bitcoin as legal tender raises a number of macroeconomic, financial and legal questions that need to be analyzed very carefully, IMF official Jerry Rice said at a press briefing. Rice said the IMF is monitoring developments closely and will continue to consult with the authorities on the possible implications.
When El Salvador legalized Bitcoin
Earlier this week, El Salvador made history when the national congress approved a bitcoin law that makes the decades-old cryptocurrency a legal tender in the country, which can be used alongside the U.S. dollar to pay for goods and services, settle debts and transfer money. President Nayib Bukele then announced that the state is installing bitcoin mines powered by geothermal energy from volcanic sources to create a cleaner, greener source of production for the asset. But organizations like the IMF seem unimpressed. For years, they have resisted the general need for and growth of cryptocurrencies and have instead focused on creating government-backed digital currencies (which are in fact centralized).
Development is noise
Foreign investors and banks have also sided with the IMF on this issue. Some are calling for ever-higher premiums for holding Salvadoran debt, while others, such as Citibank, describe bitcoin’s development as noise that disrupts the IMF’s current efforts to help the Salvadoran economy. Cryptocurrencies are a very marginal story for the Salvadoran investment thesis, says Patrick Esteruelas, head of research at Emso Asset Management in New York. He added: El Salvador’s attractiveness (to investors) depends on Buquellet’s ability to use his unquestionable political capital to control a large consolidated budget deficit. But not everyone is against Salvador and Bukel. This week, neighboring countries Mexico and Panama and the South American country Paraguay also jumped on the bitcoin bandwagon. Local politicians have confirmed their interest in further integrating Trump into their economies, and some have even changed their Twitter profiles to the laser eye meme. I will promote and offer a legal brand of crypto-currencies in Mexico in Camara diputatos #btc I will promote and propose legislation on crypto currency in the Mexican lower house #btc pic.twitter.com/zwhYOZ7KAg – Eduardo Murat Hinojosa (@eduardomurat) 8. June 2021
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There is a movement in Central America to integrate Bitcoin into the country’s economy. El Salvador is one of a handful of countries in the world to have officially recognized Bitcoin as a legal payment method. This recognition came via El Salvador’s Central Bank, which announced earlier this month it would start testing a Bitcoin payment system by accepting the cryptocurrency for services from the country’s Post Office, and could lead to other monetary institutions to adopt the digital currency. This is clearly a positive development that will benefit the country’s economy, but this decision has also raised concerns from some critics.. Read more about costa rica, imf and let us know what you think.
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