IMF warns El Salvador of bitcoin-related risks in new statement

El Salvador should not use bitcoin as legal tender due to the financial and consumer risks it poses, International Monetary Fund (IMF) staff wrote in a concluding statement related to a mission in the Central American country. 

"Given Bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability," the November 22 IMF communication states. "Its use also gives rise to fiscal contingent liabilities. Because of those risks, bitcoin should not be used as a legal tender." 

IMF staff say that while it welcomes financial inclusion and growth efforts, El Salvador should address risks related to using bitcoin as legal tender, its "new payments ecosystem" and bitcoin trading. The country made Bitcoin legal tender alongside the U.S. dollar on Sept. 7. 

The IMF makes several recommendations for El Salvador in the statement, including narrowing the scope of the bitcoin law. It also suggests bolstering regulation and oversight of its payment system in order to protect consumers, safeguard against money laundering and terrorism financing (AML/CFT) and manage risk. 

"Like for other e-wallets, Chivo should be required to fully safeguard customers' funds, both in U.S. dollars and Bitco