El Salvador should stop using Bitcoin (BTC) as legal cash, according to the International Monetary Fund's (IMF) executive board. Following bilateral talks with El Salvador, the report was published.
The International Monetary Fund (IMF) directors noted in a statement issued on Tuesday that there are significant risks connected with the usage of bitcoin on economic stability, fiscal responsibility, and consumer rights, as well as fiscal contingent liabilities. El Salvador was the first country in the world to accept Bitcoin as legal money in addition to the US dollar. El Salvador also began to buy Bitcoin last year, when the price was approximately $50,000 per unit. El Salvador made a large Bitcoin purchase of $15 million for 410 Bitcoin investments on Friday.
Bitcoin, on the other hand, has dropped about 50% from its high in early November, putting El Salvador's loss at around $20 million. In reality, on Tuesday afternoon, Bitcoin was trading at $36,671, a modest increase from Saturday, when it plummeted below $35,000 and hit its lowest level since July.
Furthermore, several IMF directors have raised worry about the dangers of issuing bitcoin-backed bonds, according to the IMF. This refers to the President's proposal, in collaboration with Blockstream, to fund $1 billion through a Bitcoin Bond.
El Salvador, in the meantime, has made a strong foray towards Bitcoin with the creation of Chivo, a national virtual wallet. Furthermore, the wallet gives the ability to trade Bitcoin and make payments with zero-fee transactions and rapid cross-border transfers.
Similarly, IMF directors agreed that the Chivo e-wallet might help with digital payment methods. Simultaneously, they underlined the importance of tight regulatory control.