IMF urges El Salvador to narrow the scope of its Bitcoin law
The International Monetary Fund (IMF) recommended that El Salvador narrow the laws governing Bitcoin (BTC) in the country and strengthen the regulatory framework.
The IMF said the program talks between El Salvador and the financial agency are centered on strengthening reforms, with a primary focus on addressing the risks associated with Bitcoin use. El Salvador President Bukele's budget for 2025, which anticipates the nation to be debt-free, was positively highlighted by the IMF in Thursday's presentation.
Bitcoin remains key element in ongoing talks
At a press conference on Thursday, Julie Kozack, the IMF's director of communications, stated that the organization has ongoing discussions with the Salvadoran government.
Their goal is to complete a new program supported by the IMF that will stabilize the economy, adapt to changes, and encourage reforms that will spur growth. Kozack also advised El Salvador to limit its exposure to Bitcoin in the public sector during a press conference, according to Reuters. She continued by saying that while El Salvador's budget proposal for 2025 is a positive step toward strengthening public finances, it still needs to be strongly implemented.
IMF addresses El Salvador’s fiscal issues
The recommendation from the IMF comes after a statement made in August that particularly addressed El Salvador's financial problems and included Bitcoin as a key topic of discussion.
Even though many of the risks associated with Bitcoin have not yet materialized, it is widely acknowledged that more work is necessary to improve transparency and reduce any potential risks to fiscal and financial stability. More conversations in this and other important areas are still required, the post added.
El Salvador’s Bitcoin law
There has been a long history of back and forth regarding Bitcoin between El Salvador and the IMF. The IMF stated in November 2021 that El Salvador should not accept Bitcoin as legal tender and urged the nation to tighten up on oversight and regulation of that ecosystem. The IMF reiterated this demand in January 2022.
El Salvador became the first country to accept Bitcoin as an alternative form of legal tender when its so-called Bitcoin law went into effect in September 2021. It currently has 5892 Bitcoin, which is worth roughly $345 million in today's currency. Together with the Salvadoran government, the IMF is looking into ways to stabilize the country's economy, including suggestions for controlling the risks related to Bitcoin.
The president of El Salvador, Nayib Bukele, who approved the legislation designating Bitcoin as legal tender, stated in August that the monetary experiment had produced varying outcomes. Although Bitcoin has not gained much traction at home, Bukele noted that it is still a "net positive" for the nation.
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