The International Monetary Fund (IMF) has urged El Salvador to narrow the scope of its bitcoin legislation and limit public sector exposure to the cryptocurrency. The organization seeks to negotiate a program with Salvadoran officials focused on macroeconomic stabilization and growth reforms.
During a press briefing on Thursday, Julie Kozack, the IMF’s communications director, highlighted the importance of addressing risks associated with bitcoin in ongoing discussions with Salvadoran authorities. “What we have recommended is a narrowing of the scope of the bitcoin law, strengthening the regulatory framework and oversight of the bitcoin ecosystem,” Kozack stated.
The IMF aims to establish a new program that would assist El Salvador in stabilizing its economy and implementing growth-enhancing reforms. This recommendation follows an August statement emphasizing the country’s fiscal challenges, with bitcoin being a critical issue. Progress has been made in negotiations toward a Fund-supported program aimed at enhancing public finances, boosting bank reserves, improving governance and transparency, and mitigating risks associated with bitcoin.
El Salvador’s bitcoin law, which came into effect in September 2021, marked it as the first country to accept bitcoin as an alternative legal tender. The IMF is looking to work with Salvadoran authorities to stabilize the economy and manage the risks tied to bitcoin. Despite many potential risks not yet materializing, there is recognition of the need to enhance transparency and mitigate fiscal and financial stability risks related to the initiative.
In August, El Salvador’s President Nayib Bukele, who signed the bitcoin legalization bill, acknowledged mixed results from the monetary experiment. He noted limited domestic adoption of bitcoin but still considered it a “net positive” for the country.
Credit: TheBlock (Text Excluding Headline)
