El Salvador’s adoption of Bitcoin as legal tender may imply a series of risks and regulatory challenges, the International Monetary Fund (IMF) said on Thursday (June 10, 2021).
“Adoption of bitcoin as legal tender raises a number of macroeconomic, financial, and legal issues that require very careful analysis. We are following developments closely, and we’ll continue our consultations with the authorities.”, IMF spokesman Gerry Rice said.
“Crypto-assets can pose significant risks and effective regulatory measures are very important when dealing with them.”, he added.
An IMF team is conducting virtual meetings with El Salvador on its Article IV review of the country and a potential credit program including policies to strengthen economic governance. The team will meet President Bukele on Thursday.
El Salvador became the first country in the world to adopt bitcoin as legal tender after the country’s Congress on Wednesday (June 9, 2021), approved President Nayib Bukele’s proposal to embrace the cryptocurrency, a move that delighted the currency’s supporters.
“It will bring financial inclusion, investment, tourism, innovation, and economic development for our country”, says President Nayib Bukele.
Under the law, Bitcoin must be accepted by firms when offered as payment for goods and services. Tax contributions can also be paid in cryptocurrency.
Its use as a legal tender will begin in 90 days, with a bitcoin-dollar exchange rate set by the market. Mr. Bukele said the government and the Bank did not currently hold any bitcoin.
President Bukele said that he planned to build a bitcoin mining hub around the country’s geothermal potential. He also said that El Salvador would offer citizenship to people who showed evidence they had invested in at least three bitcoins.
“I’ve just instructed the president of La Geo (our state-owned geothermal electric company) to put up a plan to offer facilities for bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emission energy from our volcanos. This is going to evolve fast,” said President Bukele.
Cryptocurrency supporters hailed the move as legitimizing the emerging asset, but its impact on bitcoin regulation, taxation, or adoption in other countries remains to be seen.