El Salvador urged to ditch Bitcoin as an official currency due to ‘large risks’
President Nayib Bukele of El Salvador
The International Monetary Fund (IMF) issued a statement saying that El Salvador’s decision to adopt Bitcoin as legal tender last year “entails large risks for financial and market integrity, financial stability, and consumer protection.”
Warning that the cryptocurrency could severe undermine the country’s financial stability, the IMF urged El Salvador to scrap Bitcoin’s status as its official currency.
The international monetary regulator called for “strict regulation and oversight” of Bitcoin in El Salvador and urged the country’s government to “narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.”
The IMF also said that some Directors also expressed concern over the risks associated with issuing Bitcoin-backed bonds.
El Salvador – the first country in the world to adopt Bitcoin as legal tender – plans to issue a 10-year, $1 billion Bitcoin bond this year.
El Salvador’s President Nayib Bukele apparently brushed off the IMF warning in a Twitter post on Tuesday, which mockingly portrayed the organization as The Simpsons’ iconic buffoon character Homer Simpson walking on his hands.
“I see you, IMF. That’s very nice,” Bukele’s post said.
Bukele – who refers to himself as the ‘CEO of El Salvador’ on social media – has been a vocal supporter of Bitcoin. In November, Bukele announced plans for a ‘Bitcoin City’ funded by cryptocurrency bonds, while in October, he revealed that the country had mined its first bitcoin using power from a volcano.
On Sunday, Bitcoin traded at its lowest level since July, causing an estimated $20 million loss to El Salvador.