El Salvador receives warnings of macroeconomic, legal implications, and financial instability if the country will try to give Bitcoin the status of “legal tender”, says International Monetary Fund (IMF). Cryptocurrencies are known for being highly risky and dealing with them requires specific regulatory and legal frameworks.
IMF, which has its stake in the economic condition of El Salvador, has raised an eyebrow over the recent statement of the country’s President.
It was proposed by Nayib Bukele, the head of the state, that he has proposed a proposal through which Bitcoin will be legalized. He said that El Salvador will officially recognize Bitcoin as an investment vehicle under a “legal tender”. The President also talked about this proposal on his Twitter account and engaged in discussion with other account holders as well.
On Twitter, the President engaged with the public and apprised them about the proposal. He even said that in order for encouraging Bitcoin investment in the country, he would offer multiple benefits. For instance, the President said that any foreign investor who wishes to come to El Salvador and invest in Bitcoin will be given permanent residence status. He stated that the investors would not need to go through the hectic process of visas from time to time. In fact, their visas will be for an extended period within which they will be able to establish any business entity as well.
However, such proposals did not convince IMF which is the global authority that monitors the economic and financial policies of its members. Since El Salvador is also a member of the IMF, therefore, the concerns of the IMF are genuine.
IMF stated that the prevailing economic and financial conditions of El Salvador do not allow the country to venture outside its comfort zone. Obviously, crypto is a new thing for El Salvador and there is a complete lack of infrastructure to deal with crypto in the country. IMF said that there could be serious implications upon El Salvador’s macroeconomic conditions which would result in financial instability. In addition, a lack of knowledge of crypto will further increase legal implications and there is no regulatory or legal framework in place in El Salvador.
Keeping in view these conditions, engaging with crypto is not a good idea for the sake of the country’s economic conditions, claimed IMF.
An official of IMF, Gerry Rice, President of El Salvador would have to be very careful about crypto. There are apparent high risks involved which are associated with any kind of crypto investment. The higher the rate of the cryptocurrency, the higher the possibility of risks and their consequences.
IMF official apprised further that IMF would want to meet President Bukele as soon as possible to discuss the “legal tender”. In fact, the country has asked IMF to lend a loan of US$ 1 Billion.