'In the near-term, the actual costs of implementing Chivo and operationalizing the Bitcoin law exceed potential benefits,' said IMF. cryptocurrency crypto
IMF Tells El Salvador: Costs of Making Bitcoin Legal Tender Exceed Potential Benefits
El Salvador became the first country to adopt bitcoin as an official currency with legal tender status alongside the U.S. dollar in September last year. The IMF report notes that the Salvadoran government’s Chivo wallet, which can be used for dollars and, has “amassed a sizeable number of clients, 3.8 million, although it is unclear how many are using bitcoin in their transactions or holding balances in bitcoin.
The IMF estimates that the short-term budgetary costs are 1% of GDP for 2021-2022 while near-term gains may measure up to ¼% of GDP per year.By adopting bitcoin as legal tender considerable risks are introduced to financial stability, financial and market integrity, and consumer protection … If the use of bitcoin increases significantly, it can risk the dollarization regime that has proven to be [a] successful nominal anchor for the economy.
The International Monetary Fund added that “Three other areas require prompt corrective measures.” Two of the areas are “Developing strict Chivo’s regulatory oversight” and “Safeguarding financial stability and adapting the banking regulatory frameworks.”
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