IMF advises El Salvador to limit Bitcoin exposure

The IMF is particularly concerned about transparency issues and the potential impact on the country’s fiscal stability.

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The International Monetary Fund (IMF) has urged El Salvador to limit its exposure to Bitcoin and to narrow the scope of its Bitcoin law. Julie Kozack, the IMF’s director of communications, stated that recommendations include strengthening the regulatory framework and enhancing oversight of the Bitcoin ecosystem. The IMF has consistently raised concerns about the financial risks associated with Bitcoin, particularly regarding transparency and its potential impact on the country’s financial stability.

Despite projecting a 3% growth for El Salvador’s economy this year, the IMF remains critical of the current Bitcoin programme, which has been linked to risks that could undermine fiscal stability. The organisation has called for further efforts to improve transparency and address potential risks related to Bitcoin, highlighting the need for ongoing discussions in key areas.

El Salvador is currently negotiating a new loan with the IMF, owing the organisation approximately 107.7 million in special drawing rights. This loan aims to stabilise the country’s macroeconomic situation while the government is willing to implement economic reforms. The IMF is working with El Salvador to enhance liquidity reserves, improve public finances, and ensure good governance amid concerns about Bitcoin risks. The government currently holds over $360 million in Bitcoin.