In a statement, the IMF acknowledged that bitcoin, and cryptocurrencies in general, prove to be a good payment option, but making them legal tender is not good for financial stability and can create problems. “Given the very high volatility of bitcoin’s price, its use as legal tender poses major risks to consumer protection, financial integrity, and stability. Because of these risks, bitcoin should not be used as legal tender. ” IMF said in a statement.
The global agency also asked El Salvador to reduce the scope of its bitcoin law and strengthen the regulation and supervision of the new payment ecosystem.
El Salvador plans to build the world’s first “Bitcoin City,” initially funded by bitcoin-backed bonds. President Nayib Bukele issued a statement over the weekend and doubled down on his stance on using cryptocurrencies to boost investment in the country.
The campaign for bitcoin in El Salvador had been going on for a week. Speaking at the closing ceremony of the same, Bukele said that the planned city in the eastern region of La Union would receive geothermal energy from the volcano and that no tax would be levied except value-added tax (VAT). Let us tell you that in September, when bitcoin was declared a legal tender in the country, the government had to face tremendous opposition from the public there and its effect was also seen on the cryptocurrency market around the world.
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