The International Monetary Fund said the risks of El Salvador’s bitcoin adoption “have not materialized” — primarily thanks to its “limited” use — but caution is warranted.
“Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to bitcoin,” the IMF said in a statement on Friday.
The words follow an annual visit to El Salvador from the United Nations’ financial agency, which followed last month’s $600 million bond payment by the Central American nation.
Much to the IMF’s chagrin, El Salvador made bitcoin legal tender in September 2021, and its president, Nayib Bukele, has been a vocal bitcoin proponent on Twitter. Still, his bullishness hasn’t exactly paid off, with paper losses on the nation’s bitcoin investments currently estimated at a minimum of 50%.
Because of El Salvador’s opaque purchases and holdings, exact investment figures are unknown. “Greater transparency over the government’s transactions in bitcoin and the financial situation of the state-owned bitcoin-wallet (Chivo) remains essential,” the IMF said.
Though its bitcoin investments have yet to pay off, El Salvador’s economy has experienced a “full recovery” to pre-pandemic levels, the IMF said, thanks to “the effective government response to the health crisis.”
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