IMF has asked El Salvador to drop Bitcoin as legal tender, repeatedly.
But the country has responded by saying “No international organization is going to make us do anything, anything at all”. The statement of Treasury Minister Alejandro Zelaya reflects El Salvador President and Bitcoin advocate Nayib Bukele stance.
Tense relationship between IMF and El Salvador
El Salvador and IMF came locked horns last summer after the former became the only country to adopt Bitcoin as legal tender. IMF has since said that the country’s embrace of Bitcoin has led to “a number of macroeconomic, financial and legal issues.”
Despite, El Salvador continues to further its Bitcoin play. In the September of 2021 when Bitcoin adoption became official, the country’s Congress approved $150 million to facilitate US dollar and Bitcoin transactions.
IMF’s not impressed and has thrice slammed Bitcoin’s adoption, the last came in January 2022, saying Bitcoin as legal tender “entails large risks for financial and market integrity, financial stability, and consumer protection. It also can create contingent liabilities.”
Why IMF thinks Bitcoin is the problem for El Salvador
As per the international organization, the Central American country’s economy is shrinking while its public debt is expanding. It argues that using Bitcoin as the national currency risks halting its recovery. Regardless, what IMF thinks, President Bukele has added an estimated 1,800 BTC to the country’s treasury since.
Even bought another 410 BTC during the recent crypto market crash. Check out this tweet from Bukele, poking fun at IMF indirectly and solidifying his Bitcoin adoption stance.
Public sentiment over the Bitcoin adoption policy
Amidst the controversy, some Salvadorans support their President’s decision. Computer store owners and mobile phone accessories sellers are content and cite experience as good, have observed increase in sales and say once more people familiarize themselves with how to use Bitcoin wallet, it will enable adoption fast.
Besides IMF, Bank of England, World Bank, JP Morgan and Moody’s Investor Service have criticized El Salvador’s move. Within the country, there are also people who do not align with Bukele’s vision of Bitcoin adoption. Several protests and university surveys are a testament to that fact. These center around Bitcoin Law which mandates Bitcoin use, who holds the private keys, etc.
Credit rating agency Moody’s Investor Service says government trades in Bitcoin “quite risky, particularly for a government that has been struggling with liquidity pressures in the past.” Since El Salvador faces an $800 million bond maturing in January 2023, and the doubts whether it can pay off this debt are widespread.
So unless these concerns are addressed, mass adoption by Salvadorans is a far-fetched dream.