IMF has legal, economic concerns about El Salvador's plan to make bitcoin legal tender
- The IMF has raised an alarm over El Salvador's historic move in adopting legislation to make bitcoin a legal tender, Bloomberg reported.
- "Adoption of bitcoin as legal tender raises a number of macroeconomic, financial, and legal issues," IMF said.
- Once the bill is approved, bitcoin will automatically and immediately be converted into US dollars upon use.
- For more stories go to www.BusinessInsider.co.za.
The International Monetary Fund on Thursday has raised alarms over El Salvador's historic move in approving legislation to make bitcoin legal tender. It is the first country in the world to do so.
"Adoption of bitcoin as legal tender raises a number of macroeconomic, financial, and legal issues that require very careful analysis," said Gerry Rice, an IMF spokesman, during a scheduled press briefing, Bloomberg first reported.
He continued: "Crypto assets can pose significant risks and effective regulatory measures are very important when dealing with them."
The congress of El Salvador on Wednesday voted in favour of a law to establish bitcoin as legal tender alongside the US dollar in what many viewed as a milestone for the cryptocurrency, including President Nayib Bukele.
"Every restaurant, every barber shop, every bank - everything can be paid in U.S. dollars or Bitcoin and nobody can refuse payment," Bukele said Tuesday evening during a social media hangout.
Bitcoin rose around 17% from its intraday low following the news.
Once the bill passes through the legislative processes, bitcoin will have the same status as the US dollar, the country's current national currency. Bitcoin will automatically and immediately be converted into US dollars upon use.
"We are following developments closely, and we'll continue our consultations with the authorities," Rice said.
Rice said the IMF will hold discussions with Bukele to discuss the bitcoin law. The leader has been in close touch with the Fund thanks to a potential new credit program worth about $1 billion.
Many critics have questioned the move, pointing to bitcoin's intense volatility. The cryptocurrency has lost almost 50% of its value since hitting an all-time high of nearly $65,000 in April.
Get the best of our site emailed to you every weekday.
Go to the Business Insider front page for more stories.