IMF urges El Salvador to narrow Bitcoin laws amid loan negotiations IMF urges El Salvador to narrow Bitcoin laws amid loan negotiations
El Salvador's Bitcoin law is under scrutiny by the IMF amid loan discussions, with the regulator recommending narrowing its scope.
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Updated: Oct. 4, 2024 at 8:57 pm UTC
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The International Monetary Fund (IMF) has recommended that El Salvador narrow the scope of its Bitcoin (BTC) law and strengthen regulatory oversight during ongoing talks regarding a potential lending program, Bloomberg News reported, citing IMF Director of Communications Julie Kozack.
The discussions, held in Washington, focused on measures to enhance economic governance and bolster public finances.
In a press briefing on Oct. 3, Kozack emphasized that the IMF’s main recommendation is a “narrowing of the scope of the Bitcoin law, strengthening the regulatory framework and oversight of the Bitcoin ecosystem.”
The IMF has voiced concerns regarding the potential risks posed by Bitcoin adoption in El Salvador, a key topic in negotiations on the country’s new lending program. The discussions aim to create a framework of policies that could aid in boosting productivity and strengthening economic reforms.
Kozack added:
“Addressing risks arising from Bitcoin is a key element of these discussions.”
El Salvador made headlines in 2021 as the first country to adopt Bitcoin as legal tender, a move that has spurred mixed reactions. While the country’s economy has seen positive growth, including a GDP increase of over 10% and a significant reduction in crime rates, the IMF continues to express reservations about the financial risks tied to Bitcoin’s volatility.
The IMF’s concerns coincide with El Salvador’s newly presented 2025 budget proposal, which Kozack described as “a step in strengthening public finances.” The proposal includes measures to control the nation’s budget, focusing on spending and implementing reforms to improve governance.
Despite El Salvador’s achievements, including a 95% decrease in the murder rate and a 95% boost in tourism in 2023, some international institutions remain cautious about Bitcoin’s long-term impacts on the country’s financial stability.
Supporters of the Bitcoin experiment, including prominent figures such as President Nayib Bukele, have defended the initiative, citing significant economic improvements since its adoption.
VanEck’s head of digital assets research, Mathew Sigel, criticized the IMF for “holding El Salvador hostage over Bitcoin.” He further highlighted several notable achievements since the country adopted Bitcoin, including El Salvador’s GDP growth, declining crime rate, and booming tourism.
Sigel praised President Nayib Bukele for driving what he called a “remarkable transformation,” urging the president to “stand firm” in his vision for the country.
While the government remains firm in its commitment to Bitcoin, the IMF has insisted that any future lending program must address these risks, signaling that El Salvador’s approach to crypto will remain a central focus of its discussions with the international lender.
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Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
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