El Salvador should not adopt bitcoin as its official currency given the risks associated with this cryptocurrency, the International Monetary Fund said on Monday.
This IMF publication comes the day after Salvadoran President Nayib Bukele announced his desire to build “Bitcoin City”, a new city powered by the energy of a volcano and financed by cryptocurrency debt.
The Washington-based body also highlighted the efforts made by the Salvadoran government to develop financial inclusion and economic growth through the use of digital technologies.
But “given the high volatility of bitcoin” its use as an official currency “generates significant risks for consumer protection, for the integrity of the financial system and for financial stability”.
Risks for the consumer
In addition, the IMF warned, “the use (of bitcoin) can also have budgetary consequences.”
“Bitcoin should not be adopted as the official currency,” he said, calling on the Salvadoran authorities to “limit” the scope of the legislation dating from September 7 which made the cryptocurrency an official currency of the country to the same. title than the US dollar (which replaced the national currency, the colon, twenty years ago).
The international body also called for the Chivo Wallet digital wallet – controlled by Salvadoran authorities – “to protect all user funds, in dollars and bitcoins, through separation and protection of reserve assets. “.
At a bitcoin conference in Latin America, Mr. Bukele explained on Saturday that the Bitcoin City “will include (it) everything: residential neighborhoods, other merchants, services, museums, places of recreation. . airports, ports, trains “.
10% growth
And that the volcano of Conchagua “will provide (it) the energy necessary for the whole city and will also feed (it) mining” – production of cryptocurrencies, very greedy in electricity.
According to the IMF, the country’s gross domestic product is expected to grow by 10% in 2021 and 3.2% the following year.
Bukele on Twitter described the IMF’s publication as an “interesting” analysis of his country. “Obviously, we agree with certain elements, such as the (risky) adoption of bitcoin,” he noted.