Bitcoin Risks in El Salvador ‘Have not Materialized,’ Thanks to Limited Use: IMF
- The IMF said that Bitcoin adoption risks “have not materialized” in El Salvador due to the limited use of digital assets.
- The agency demanded for more transparency from El Salvador regarding its BTC purchases.
- The country’s BTC holdings have suffered at least 50% impairment losses due to the prevailing crypto winter.
- The IMF believes that the country will make a full recovery to pre-pandemic levels in the near future.
The International Monetary Fund, a major financial agency of the United Nations, and an international financial institution, has warned the Central American country of El Salvador multiple times against the adoption of Bitcoin (BTC), the world’s largest crypto coin, as legal tender. In a recent statement, the IMF stated that the risks associated with crypto adoption “have not materialized” in the region because of the limited use of digital assets.
“While risks have not materialized due to the limited Bitcoin use so far—as suggested by survey and remittances data—its use could grow given its legal tender status and new legislative reforms to encourage the use of crypto assets, including tokenized bonds (Digital Assets Law),” said IMF in the statement.
There was an annual visit by the IMF to El Salvador, following which this report was published on Friday. It is crucial to note that the international agency has been against the adoption of Bitcoin in El Salvador pretty much from the beginning. It is also a fact that the holdings of the Central American nation have suffered impairment losses of at least 50%, but the actual data is not available.
Interestingly, El Salvador started purchasing Bitcoin in 2021 during the crypto market bull run and continued to purchase it throughout 2022 when the prices kept falling. Interestingly, under the President of the country, Nayib Bukele, the adoption of the leading crypto coin has been gradual but certain.
As reported earlier by BitcoinWisdom, Bukele announced that the Central American country will purchase 1 BTC per day, just days after the collapse of FTX led to BTC dropping to 2-year low. It is also crucial to note that Bukele slammed down the rumors that his country had no relationships with the founder of bankrupt crypto exchange FTX, Sam Bankman-Fried, also known as SBF in the crypto space.
The IMF noted in its report that the economy of El Salvador remains unaffected by the decline in the price of BTC and is growing steadily. Recently, it was reported that El Salvador is focused on attracting tourists to the region and is also in the process of creating a Bitcoin City. However, it needs outside investment for the same.
The financial agency noted that the country has remained opaque about its BTC holdings and its sales and purchases of the leading cryptocurrency.
“Greater transparency over the government’s transactions in bitcoin and the financial situation of the state-owned bitcoin-wallet (Chivo) remains essential,” said the IMF in the report.
While the country’s crypto adoption initiative has yet to pay off, the IMF believes that the country will make a full recovery to pre-pandemic levels in the near future thanks to “the effective government response to the health crisis.” As reported earlier, Bukele has announced that he will fight for re-election in the 2024 Presidential campaign.