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IMF issues veiled warning against El Salvador’s bitcoin law

The International Monetary Fund is warning that some of the consequences “could be dire” for a country adopting bitcoin as a national currency.

According to Tobias Adrian, financial advisor and director of the IMF marketing department, and Rhoda Weeks-Brown, general counsel and director of the legal department, cryptocurrencies such as bitcoin (BTC) can hold up in countries without stable inflation and exchange rates, and those without banks. tools can be provided. make payment. However, for an economy the cost can be significant.

Two IMF officials alleged that countries adopting cryptocurrencies as national currencies or “granting cryptocurrencies legal tender status” risked domestic prices to be highly volatile, and that the assets could be used as opposed to money laundering. and issues besides countering the financing of terrorism measures. The surrounding macroeconomic stability and environment.

Connected: Bitcoin at risk as IMF warns of worst recession in 90 years

Adrian and Weeks-Brown said, “If goods and services were priced in both real currency and cryptocurrency, households and businesses would spend significant time and resources deciding which money to keep rather than engaging in productive activities.” ” “Government revenue would be exposed to exchange rate risk if taxes were quoted in advance in a cryptocurrency, while expenditures remained mostly in the local currency, or vice versa.”

He also claimed that monetary policy in general “will bite”, that widespread crypto adoption undermines the credibility of any country’s adoption of an asset such as BTC or any other token, and that “cryptocurrency prices fluctuate heavily.” ” points to. The price of bitcoin has already risen between about $65,000 and $30,000 this year, reaching over $40,000 today and then dropping to $37,000.

Although the IMF blog did not specifically call out El Salvador, which is set to begin accepting bitcoin as legal tender starting in September, Adrian and Weeks-Brown noted that any cryptocurrency should be considered a national currency. Creating is “an inevitable shortcut” to more inclusive financial services. The pair included claims of environmental risks to mining cryptocurrencies, although El Salvador President Nayib Bukele has said he plans to take advantage of the country’s abundant geothermal energy to generate bitcoin blocks.

Connected: El Salvador’s bitcoin adoption could jeopardize IMF talks: JP Morgan

It is not new for the IMF to express negative views on countries adopting crypto. Spokesmen have previously said that smaller countries such as the Marshall Islands that recognize digital currency as legal tender “carry risks to macroeconomic and financial stability as well as financial integrity.” In that case, the IMF said that the local economy of the islands was affected by the economic fallout of the pandemic and would likely not settle with the introduction of the digital currency.

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