IMF says El Salvador’s bitcoin risk has not materialized but ‘needs to be addressed’ According to Reuters

© Reuters. People walk past a Bitcoin sign during a meeting between local bitcoin users and foreigners at the conclusion of the Bitcoin Adoption Summit – A Lightning, at El Zonte Beach, in Chiltiupan, El Salvador on November 18, 2021. REUTERS/Jose Cabezas

By Brendan O’Boyle

(Reuters) – The risks to El Salvador’s embrace of bitcoin “have not materialized,” but the use of the cryptocurrency still requires transparency and attention, the International Monetary Fund (IMF) said on Thursday. Six in a statement after a visit to the Central American country.

“Given the regulatory risks, financial fragility and primarily speculative nature of the cryptocurrency market, authorities should reconsider their plans to expand capacity,” the IMF said in a statement. government exposure to bitcoin.”

The annual visit of the IMF staff comes after El Salvador’s $600 million bond payment last month amid investor concerns about the country’s fiscal resources and policies. This.

The so-called “article IV” visit of the IMF in the past has been harshly criticized. El Salvador’s move to legal tender for bitcoin in September 2021 effectively shut down IMF financing.

While the lender notes that the risk “has not materialized due to limited bitcoin usage to date,” it said that “cryptocurrency usage is likely to increase due to the state of legal tenders and new regulatory reforms to encourage the use of crypto assets, including tokenized bonds.”

El Salvador’s parliament last month passed legislation regulating the issuance of digital assets by both state and private entities.

President Nayib Bukele announced on Twitter a series of purchases of about 2,380 bitcoins before mid-November, when he said the Treasury Department would buy one bitcoin per day.

If those purchases are made, the government will hold nearly 2,470 coins purchased for about $106.4 million. The present value of that investment is $52.2 million, with a loss of over 50%.

The numbers are Reuters estimates, as the government does not officially disclose the purchases, holdings or whereabouts of the coins.

“More transparency over government bitcoin transactions and the financial position of state-owned bitcoin wallets (Chivo) remains essential,” the IMF said.

The IMF highlighted the “full recovery” of El Salvador’s economy to pre-pandemic levels, “powered by the government’s effective response to the health crisis.”

The IMF said real GDP is projected to grow 2.4% in 2023, well above the historical average.

However, the lender also expressed concern about the growing current account deficit and the possible spillover effects of the recession in the United States.

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