El Salvador Angrily Rejects IMF Call to Ditch Use of Bitcoin

SAN SALVADOR, El Salvador (AP) — The government of El Salvador on Monday rejected a recommendation from the International Monetary Fund to drop Bitcoin as legal tender in the Central American country.

Treasury Minister Alejandro Zelaya angrily declared that “no international organization will force us to do anything, anything”.

Zelaya told a local TV station that Bitcoin is about “sovereignty”.

“Countries are sovereign nations and they make sovereign decisions on public policy,” he said.

The IMF recommended last week that El Salvador dissolve the $150 million trust fund it created when it made cryptocurrency legal tender and return any of those unused funds to its treasury.

The agency raised concerns about Bitcoin price volatility and the possibility of criminals using the cryptocurrency. After nearly doubling in value at the end of last year, Bitcoin plunged in value.

Zelaya said El Salvador had complied with all rules relating to financial transactions and money laundering.

The trust fund was intended to enable the automatic conversion of Bitcoin into US dollars – El Salvador’s other currency – to encourage hesitant people to adopt the highly volatile digital currency.

The IMF also recommended eliminating the $30 offer to entice people to start using the “Chivo” digital wallet and strengthening digital wallet regulation to protect consumers. He suggested there might be benefits to using Chivo, but only in dollars, not Bitcoin.

“In the short term, the actual costs of implementing Chivo and operationalizing the Bitcoin Law outweigh the potential benefits,” the report states.

Salvadoran President Nayib Bukele had rejected IMF recommendations regarding Bitcoin.

Government officials told the IMF that the launch of “Chivo” had dramatically increased financial inclusion, drawing millions of people into the financial system who previously did not have bank accounts. They also talked about parallel tourism promotion targeting bitcoin enthusiasts.

The government has not found it necessary to reduce the scope of its Bitcoin law, but the agreed regulations could be strengthened, according to a report.

Bukele led the push to adopt Bitcoin as legal tender alongside the US dollar. El Salvador’s Legislative Assembly made the country the first to do so in June, and the Bitcoin Law went into effect in September.

El Salvador and the IMF have been negotiating $1.3 billion in loans for months.

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