El Salvador Government Angrily Rejects IMF Call to Drop Bitcoin Use

The government of El Salvador on Monday rejected a recommendation by the International Monetary Fund to drop Bitcoin as legal tender in the Central American country.

Treasury Minister Alejandro Zelaya angrily said that “no international organisation is going to make us do anything, anything at all.”

Zelaya told a local television station that Bitcoin is an issue of "sovereignty.” Bitcoin price in India stood at Rs. 30.73 lakh as of 10am IST on February 1.

“Countries are sovereign nations and they take sovereign decisions about public policy,” he said.

The IMF recommended last week that El Salvador dissolve the $150 million (roughly Rs. 1,120 crore) trust fund it created when it made the cryptocurrency legal tender and return any of those unused funds to its treasury.

The agency cited concerns about the volatility of Bitcoin prices, and the possibility of criminals using the cryptocurrency. After nearly doubling in value late last year, Bitcoin has plunged in value.

Zelaya said El Salvador has complied with all financial transaction and money laundering rules.

The trust fund was intended to allow the automatic conversion of Bitcoin to US dollars — El Salvador's other currency — to encourage people wary of adopting the highly volatile digital currency.

The IMF also recommended eliminating the offer of $30 (roughly Rs. 2,230) as an incentive for people to start using the digital wallet Chivo and increasing regulation of the digital wallet to protect consumers. It suggested there could be benefits to the use of Chivo, but only using dollars, not Bitcoin.

“In the near-term the actual costs of implementing Chivo and operationalising the Bitcoin law exceed potential benefits,” the report said.

Salvadoran President Nayib Bukele had been dismissive of the IMF's recommendation's concerning Bitcoin.

Government officials told the IMF that the launch of Chivo had significantly increased financial inclusion, drawing millions of people who previously lacked bank accounts into the financial system. They also spoke of the parallel tourism promotion targeting Bitcoin enthusiasts.

The government did not see a need to scale back the scope of its Bitcoin law, but agreed regulation could be strengthened, according to a report.

Bukele led the push to adopt Bitcoin as legal tender alongside the US dollar. El Salvador's Legislative Assembly made the country the first to do so in June and the Bitcoin law went into effect in September.

El Salvador and the IMF have been negotiating $1.3 billion (roughly Rs. 9,680 crore) in lending for months.