IMF criticizes El Salvador again for Bitcoin fund approval
The government of El Salvador approved the distribution of $30 in Bitcoin (BTC) to each citizen. The law passed on Monday (31/08) received new old criticisms from the International Monetary Fund (IMF).
In fact, the IMF published an old critique made on Aug. 26, but added a new twist. The fund warned of the risks of what it called “privately issued cryptoactives.”
“Privately issued cryptoactives like Bitcoin pose substantial risks. In this sense, making them equivalent to a national currency is an inadvisable shortcut”, warned the IMF.
The IMF admits the revolutionary role of cryptocurrencies. In fact, the institution goes so far as to say that they can provide cheaper and faster payments, as well as improve financial inclusion in poorer countries.
However, they warn of aspects such as high volatility and risks involving the BTC and other cryptocurrencies. At the same time, the IMF questions whether the El Salvador movement can become a global example, especially in more developed countries.
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“Cryptoactives are unlikely to become popular in countries with stable inflation and exchange rates and reliable institutions. Households and businesses would have very little incentive to price or save on unstable assets like Bitcoin even if it had legal tender or currency status. Its value is very volatile and unrelated to the real economy,” said the institution.
However, data show that of the 20 countries that most adopt BTC, seven are in the group of the largest economies in the world: United States, China, India, South Africa, Brazil, Russia and Argentina. That is, the IMF may be right, but the BTC also finds its way into big economies.
The fund will have a total value of $150 million. Citizens will be able to choose whether they want to keep BTCs or spend them on purchasing goods and services.
According to Finance Minister María Luisa Hayem, the fund’s objective is to support the transactions that users make and receive precise amounts when making currency conversions. She also claims that the fund seeks to generate financial inclusion, especially for the poorest citizens.