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IMF believes minimal Bitcoin use in El Salvador prevents projected risks.

  • The international money watchdog recommended El Salvador to be cautious while increasing government exposure to Bitcoin $21,985 due to the "speculative nature" of cryptocurrency markets.

  • The IMF advised El Salvador to "eschew" tokenized bonds due to their legal and financial dangers, thus it should reconsider its decision.

IMF believes minimal

The IMF recently visited El Salvador and suggested that it "reconsider" its plans to use Bitcoin.

The international money watchdog has advised El Salvador to exercise caution while growing government exposure to Bitcoin $21,985 due to the "speculative nature" of the cryptocurrency markets.

In a statement on February 10, the International Monetary Fund (IMF) emphasised that El Salvador's use of Bitcoin is "limited" and that as a result, the risks related to it have "not materialised" yet. IMF representatives recently visited the country.

According to the IMF, El Salvador should address the risk that Bitcoin poses to its financial stability, consumer protection, and fiscal viability.

It emphasised the need of being aware of these risks because its use there "may rise" now that it has been accepted as legal tender in El Salvador since September 2021.

The IMF encouraged El Salvador to "eschew" tokenized bonds due to the risks they offer in terms of both law and money, hence El Salvador was advised to rethink its choice.

Additionally, the "financial situation" of the Salvadoran government's state-owned Chivo wallet and its Bitcoin transactions were mentioned as areas where there has to be "greater transparency" on the part of the government.

This comes after recent claims that a legal basis for El Salvador's "Volcano bond," a bond backed by Bitcoin, was created on January 11.

The government of El Salvador claimed that these bonds would be used to pay down the country's debt and to fund the construction of its envisioned "Bitcoin City."

Bitcoin City is a part of El Salvador's plan to keep luring bitcoin investors. It was previously said that the nation would make preventing any potential criminal activity connected to cryptocurrencies a key priority in 2023.

Guillermo Contreras, CEO of DitoBanx, earlier stated on January 6 that the establishment of the National Bitcoin Office in El Salvador will act as "a central entity."

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