IMF Urges El Salvador to Tackle Bitcoin Risks Amid Reform Talks

The International Monetary Fund highlighted that bitcoin continues to be a central point in ongoing discussions with El Salvador regarding its economic reform program on Thursday.

El Salvador has been advised by the International Monetary Fund (IMF) to narrow the scope of its bitcoin law, bolster regulation and oversight of the cryptocurrency, and curb public sector exposure. The IMF is closely monitoring the country’s bitcoin adoption and its impact on financial stability.

IMF Urges El Salvador to Address Bitcoin Risks as Part of Reform Talks

The International Monetary Fund highlighted on Thursday that bitcoin remains a key topic in its ongoing discussions with El Salvador regarding its economic reform program. The IMF expressed concerns about the risks associated with the country’s bitcoin adoption, which became a central part of its financial landscape in 2021.

During a regular press briefing, IMF spokesperson Julie Kozack stated:

We have advised El Salvador to narrow the scope of the bitcoin law, strengthen the regulatory framework and oversight of the bitcoin ecosystem, and limit public sector exposure to bitcoin.

Kozack further noted that El Salvador’s proposed budget for 2025 is a step in the right direction to improve its public finances, but strong implementation is crucial. The IMF is continuing to engage with El Salvador as part of broader efforts to solidify reforms and ensure that the adoption of bitcoin does not threaten financial stability. Talks between the two parties center on strengthening reforms and addressing the risks tied to cryptocurrency use in the country.

In September 2021, El Salvador became the first nation to adopt bitcoin as legal tender alongside the U.S. dollar. The Chivo Wallet app and the proposed Bitcoin City, a tax-free hub powered by geothermal energy, are among the key initiatives. In December 2023, the country’s bitcoin “Volcano Bonds” were approved.

The IMF has repeatedly cautioned El Salvador against making BTC legal tender. However, the country, led by pro-bitcoin president Nayib Bukele, has maintained its bitcoin policy. Since 2021, El Salvador has gradually increased its bitcoin holdings, purchasing 1 BTC per day since late 2022. As of 2024, the country holds approximately 5,865 BTC, valued at over $356 million.

What are your thoughts on the IMF’s recommendations regarding bitcoin’s role in El Salvador’s economy? Please share your views in the comments section below.

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