The International Monetary Fund (IMF) reiterates that El Salvador should strengthen Bitcoin regulation and reduce its cryptocurrency exposure.

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IMF Recommends El Salvador to Regulate Bitcoin Ecosystem

The International Monetary Fund (IMF) has once again urged El Salvador to strengthen its regulatory framework and oversight of the national Bitcoin ecosystem. Since the country made Bitcoin a legal tender in 2021, the IMF has consistently emphasized the need for related reforms.

During a press conference on Thursday, October 3, IMF spokesperson Julie Kozack suggested that El Salvador should not only narrow the scope of its "Bitcoin Law" but also limit the public sector's exposure to the cryptocurrency.

Ignoring IMF's warning, El Salvador's Vice President: Bitcoin will remain legal tender for at least another five years

IMF Continues to Warn about Bitcoin Policy

This recommendation is not the first time the IMF has issued warnings regarding El Salvador's Bitcoin policy. As early as August this year, the IMF expressed similar concerns, stating that "while many risks have not materialized, both sides agree that further efforts are needed to enhance transparency and mitigate the potential risks of the Bitcoin project to fiscal and financial stability." The IMF emphasized the need for further discussions to address these and other important areas of concern.

The ongoing dialogue between El Salvador and the IMF highlights their differing perspectives on the use of Bitcoin. Shortly after El Salvador decided to adopt Bitcoin as legal tender in November 2021, the IMF recommended against this use of the cryptocurrency and urged the Central American country to strengthen supervision and oversight of its cryptocurrency ecosystem. In January 2022, the IMF reiterated its ongoing concerns about El Salvador's Bitcoin policy.

IMF conducts on-site visits to El Salvador: Maintains opposition to being legal tender and against introducing Bitcoin bonds

El Salvador's Risky Journey with Bitcoin

In September 2021, El Salvador became the world's first country to adopt Bitcoin as legal tender, attracting international attention. Currently, the country holds 5,892 Bitcoins, valued at approximately $345 million at current market prices.

El Salvador's President Nayib Bukele is a strong supporter of Bitcoin, promoting the adoption of the cryptocurrency as a positive step for the country's economy. However, he has acknowledged that the level of Bitcoin adoption has not met his expectations. Bukele envisions El Salvador as a hub for Bitcoin and other cryptocurrencies, but the widespread use of digital currencies in the country still faces challenges.

IMF Maintains Positive Assessment of El Salvador's Finances

Despite IMF's concerns about the country's Bitcoin policy, the organization has expressed approval of President Bukele's fiscal strategies. In its report on Thursday, the IMF mentioned the 2025 budget, which forecasts El Salvador to be debt-free. The IMF has positively evaluated this fiscal plan of the country, indicating that apart from the Bitcoin issues, El Salvador's other economic policies align with IMF's recommendations.