The IMF urges El Salvador to give up Bitcoin

by time news

El Salvador is a small country in Central America with a per capita GDP of less than $ 8,000 that is considered one of the most violent countries in the world. , Son of a Palestinian father who served as an imam and mother of Spanish descent, and is married to a woman with Sephardic Jewish roots.

The president took office vigorously. Aside from an uncompromising war on members of El Salvador’s murderous gangs, not always on the right side of adhering to human rights, sending army battalions to Congress that did not fulfill the will and dismissal of the Attorney General and five Supreme Court justices the young and capricious president is also interested in cryptocurrencies.

Not only interested but also acting. In early 2021 he promoted the definition of the Bitcoin currency as the country’s official currency, and in September the currency became legal tender in El Salvador alongside the US dollar, making the South American country the first in the world to take such a step. In addition to the extraordinary legislative activity, the president also took care to purchase tens of millions of dollars in coins for the state treasury, a purchase that has already resulted in heavy losses to the poor state coffers. Just last Friday, the president tweeted that he had bought Bitcoin for $ 15 million “at a really cheap price.”

In addition, it announced its intention to issue $ 1 billion worth of Bitcoin-backed bonds. Also, the country under his leadership is involved in the development of a virtual wallet called Chivo that allows operations such as international transfers to be performed without charge. The initiative is designed to help residents in a country where 70% of them do not have access to traditional financial services such as a bank account, gain access to such a system for the first time. The state offers $ 30 in bitcoin to anyone who opens an account in such a wallet using his ID number, which of course encouraged many in the poor country to take such a step.

As is well known, digital currencies are a cause for concern among global policymakers who fear they could undermine financial stability. The move by Bukla, which was made without consultation and without proper scrutiny of the implications, raised the level of concern at the World Bank, and this week a statement was issued calling on the bank to back President El Salvador from the decision. “We warn that there are major risks associated with the use of Bitcoin on financial stability, financial credibility and consumer confidence, as well as on fiscal liabilities,” World Bank executives wrote. The Bank also notes that the high volatility of the currency harms the security of consumers and does not allow the use of Bitcoin as money on an ongoing basis.

The report, which was published after talks with El Salvador, encourages authorities to narrow the use of the Bitcoin law by changing its definition of legal money. The world views positively, but stresses the need for strict regulation and supervision, as there are many reports of identity theft using another person’s ID number to get the guaranteed thirty dollars. $ 1.3 billion that the state is requesting from the World Bank According to estimates by the World Bank, the country’s debt is expected to reach 96% of GDP by 2026, if the country continues on the current path.

So far no presidential response or official response has been provided, and it is difficult to see how this letter will change President El Salvador’s opinion or conduct.

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