The International Monetary Fund has become the first major financial gatekeeper to reference the recent move by El Salvador to legalize Bitcoin. Several figures in the legacy financial space continue to espouse anti-crypto sentiments even as the market becomes more popular.
IMF Raises Alarm over El Salvador Bitcoin Legalization
According to a report by Reuters on Thursday (June 10, 2021), the IMF has raised legal and economic concerns regarding the decision by El Salvador to recognize Bitcoin (BTC) as legal tender. Commenting on the matter, Gery Rice, a spokesperson for the IMF remarked:
“Adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis. We are following developments closely, and we’ll continue our consultations with the authorities.”
As previously reported by BTCManager El Salvador recently recognized Bitcoin as legal tender following a vote in the country’s Parliament. A supermajority of El Salvador’s Congress — 62 out of 84 — approved President Nayib Bukele’s plan to adopt BTC as legal tender in the Central American nation.
For President Bukele, the decision to recognize Bitcoin as legal tender in El Salvador is for the benefit of the people. According to the President, the move will among other things, make it easier for Salvadorans abroad to send remittances to their loved ones in the country.
Indeed, given its status as a dollarized economy with the country adopting the U.S. dollar as its official currency two decades ago, El Salvador is significantly dependent on overseas remittances often from expatriate workers living abroad. According to World Bank figures, overseas remittances account for close to $6 billion — about 20 percent of the country’s 2019 GDP.
El Salvador adopting Bitcoin as a legal tender also pushes the boundaries of crypto utilization in the country. The Central American nation has emerged as something of a cryptocurrency hub in recent times.
Will IMF Withdraw Aid?
According to Rice, El Salvador’s Bitcoin adoption will be among a list of issues to be discussed between the IMF and Salvadoran officials. The Latin American nation is reportedly seeking the IMF’s assistance to the tune of $1 billion.
Some market commentators say President Bukele’s Bitcoin adoption drive could cast a spanner in the works as far negotiations with the IMF are concerned. The Bukele administration has also had some run-ins with Washington following the unceremonious removal of five Supreme Court Justices back in May.