IMF warns of cryptocurrency as national currency before launch in El Salvador


The International Monetary Fund warned countries that use cryptocurrency as legal tender just over a month before El Salvador became a cryptocurrency country. The first nation in the world Allow Bitcoin to pay for everything from haircuts to taxes.

The Washington-based bank said later July blog post Through the link between cryptocurrency and illegal activities, the widespread use of cryptocurrency will threaten “macroeconomic stability” and may damage financial integrity.

The International Monetary Fund did not directly mention El Salvador. But because it is negotiating a $1 billion loan with Latin American countries, its warnings indicate that 40-year-old President Nayib Bukele’s plans could complicate relations.

“I don’t think they have considered all the impact,” said Ricardo Castaneda, senior economist and coordinator of the think tank Icefi El Salvador. “This is an experiment. It will be interesting to see if it works, but if it doesn’t work, the consequences will be very serious.”

Bukele will make Bitcoin a legal tender starting on September 7.He claims that this will start prosperity and provide “a The Great Leap Forward“.

His plan is based on “Bitcoin Beach“, a surfing destination where locals pay in Bitcoin and use it for daily transactions. It was launched in 2019 with the support of an anonymous American Bitcoin donor.

The President of El Salvador, Nayib Bukele (Nayib Bukele) said that making Bitcoin a legal tender is “a great leap for mankind” © Camilo Freedman/Bloomberg

The President claimed that in a country that adopted the U.S. dollar 20 years ago, the adoption of cryptocurrency across the country will help 70% of the population without access to traditional financial services. He does not rule out putting some central bank reserves in cryptocurrencies.

He wants to use the geothermal energy of the volcano to mine Bitcoin in the country, although the details are still vague. He also launched an e-wallet called Chivo — “cool” in Salvadoran slang — which will provide people with $30 in Bitcoin to incentivize their use. According to reports, Bitcoin ATM operator Athena is setting up 13 machines in shopping malls.

But the World Bank refused to help El Salvador launch Bitcoin. The International Monetary Fund had previously warned that “Macroeconomic, financial and legal issues This requires very careful analysis.”

These plans confuse many in the financial world, and Salvadorans are at a loss.

Bond prices fell accordingly.At the same time, the country faces “Critical” financial situationIcefi’s Castaneda added that debt accounts for 89% of GDP, the fiscal deficit in 2020 accounts for 10.1% of GDP, and the debt repayment due this year is US$2 billion.

in a Polls According to a survey conducted by the Salvador Chamber of Commerce and Industry, more than 90% of respondents did not want to be forced to accept Bitcoin as a payment method, and three-quarters of the respondents vowed to continue using U.S. dollars.A sort of polling The University of Francisco Gavidia found that 44% of people expect this to make the economy worse.

Risa Grais-Targow, head of Latin America at the consulting firm Eurasia Group, said: “I think the adoption rate will be limited.” “There are still many questions about whether this can really take off.”

But proponents of cryptocurrency believe that the history of the financial crisis and hyperinflation in Latin America makes the entire region an ideal crypto melting pot, as ordinary people are looking for ways to protect themselves from unstable economic events.

Argentina is struggling with an unsustainable debt burden and the recurring threat of default, while Venezuela’s economy has shrunk by 75% since 2013. The official exchange rate is 3.3 million bolivars per US dollar (the black market exchange rate is in the billions), and the annual inflation rate is more than 2,600%.

Mauricio Di Bartolomeo, CEO of Ledn, a Toronto-based digital asset company, said: “For Bitcoin, for the first time in a long time, Latin Americans have seen an appreciation in dollar-denominated assets.”

“The Latino’s farm was taken away and the bank closed overnight, so Bitcoin is somewhat safer than other assets.”

The believers of Bitcoin point to banks such as Citigroup, which is Weighing the start of encryption services, As a sign that it is becoming mainstream.

“Bitcoin is the savior,” said Cristian Cabrera, a 37-year-old self-styled cryptocurrency consultant from Argentina, during lunch at the Bitcoin Embassy, ​​the first crypto cafe in Mexico City. “It represents the equality of everyone.”

“We are building infrastructure for the economy of the future,” said Emiliano Grodzki, CEO of Bitfarms. Bitfarms is a Bitcoin mining company that suffered inflation and devaluation in his hometown of Argentina. , Co-founded with others in Toronto.

“In this new ecosystem, we replaced the central bank… This is a brand new paradigm,” he told the Financial Times after his company went public on the Nasdaq in June.

A man in El Salvador shows off a mobile app that shows the price of bitcoin

A man in El Salvador shows off a mobile app that shows the price of Bitcoin © SOPA Images/LightRocket via Getty

In Mexico, Ricardo Salinas, the country’s third-richest man, said that 10% of his liquid investment portfolio is Bitcoin.He expressed support for the currency Twitter In June, he said he was working to make his Banco Azteca the first bank in the country to accept it.

However, within a day, the central bank, the Ministry of Finance and the banking regulators fight back, Claiming that the Bank of Mexico has no right to provide Bitcoin services and risk warnings.

In Paraguay, Congressman Carlos Rejala proposed bill Regulate Bitcoin and Bitcoin mining.A university even allows tuition fee Pay in cryptocurrency.

Despite suspicions, supporters remain firm. Lorena Ortiz, owner of the Bitcoin embassy in a Mexican city bar, has clients as old as 78 years old, and the youngest is only 16 years old. “Encryption is not just a fashion,” she said. “It stays here.”

Additional report by Gideon Long in Bogotá


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