The IMF has again called on El Salvador to change its approach to Bitcoin policies and enhance the legislation that governs cryptocurrencies.
At the press conference on October 3, Julie Kozack, the Director of the Communications Department of the IMF, stressed that El Salvador had to refine the approach to using bitcoin.
Meanwhile, Kozack underlined the necessity to increase supervision of the Bitcoin environment and minimize the state's role in the sphere.
Cryptocurrencies have been legal tender in El Salvador since September 2021, which spurred domestic and global attention.
The IMF has repeatedly raised concerns about the risks of financial instability and fiscal ones linked to the use of Bitcoin.
Some of them have criticized the use of cryptocurrencies stating that the high level of volatility could lead to some complexities in the system in Salvador.
The IMF’s renewed push comes as it discusses the contingent program with Salvadorian authorities to craft for the purpose of supporting the stabilization of this economy. The purpose of this program will be to ensure that key economic structural changes are implemented and growth is observed in the country. Kozack has noted that at least the 2025 budget proposal from El Salvador is UT forwarding in terms of strengthening the public finances; however, integration is important.
In the past, the IMF has expressed concerns about cryptocurrencies' risks, saying that they threaten financial stability and transparency. These issues are most relevant to El Salvador since the country struggles with the integration of a FIAT cryptocurrency for speculation into its economy.
However, the IMF continues to state in its August 2024 report that despite expectations that the worst has not yet come, a lot of work is still expected to be done to improve transparency, as well as fiscal and financial risks that are yet to be controlled.
Internationally, the IMF has been heavily engaged with countries through recommendations on how to absorb the economic effects of virtual currency.
In 2023, the IMF offered technical advice to Andorra on tracking Bitcoin transactions and suggested that Pakistan impose capital gains tax advances on every cryptocurrency to qualify for a large credit. These actions are part of the IMF’s approach of pressuring countries to adopt policies that address the risks posed by digital currencies.
In addition, the IMF also seeks to encourage central bank digital currencies via the REDI model regulation, education, design, and incentives. Using this framework, central banks can help their populace to be inclined towards adopting CBDCs in a controlled system as an alternative to decentralized cryptocurrencies such as Bitcoin.