IMF urges El Salvador to limit scope of bitcoin law in ongoing talks

Quick Take

  • The International Monetary Fund urged El Salvador to narrow the scope of its bitcoin law and limit the public sector’s exposure to bitcoin.
  • The IMF said it seeks to reach an agreement with Salvadoran authorities on a program for macroeconomic stabilization and growth reforms.

The International Monetary Fund has reiterated its recommendation for El Salvador to narrow the scope of its bitcoin legislation and adoption.

Julie Kozack, director of communications at the IMF, said at a press briefing on Thursday that the IMF has ongoing engagement with the Salvadoran authorities. “Addressing risks arising from Bitcoin is a key element of these discussions,” she said.

“What we have recommended is a narrowing of the scope of the bitcoin law, strengthening the regulatory framework and oversight of the bitcoin ecosystem, and limiting public sector exposure to bitcoin,” Kozack added.

Kozack said that the IMF aims to reach an agreement with El Salvador on a new IMF-supported program that would “help with macroeconomic stabilization and adjustment and also growth-enhancing reforms.”

The IMF’s suggestion follows an August statement specifically addressing El Salvador’s fiscal issues, with bitcoin as a critical point on the agenda. “Progress has been made in the negotiations toward a Fund-supported program, focused on policies to strengthen public finances, boost bank reserve buffers, improve governance and transparency, and mitigate the risks from bitcoin,” the IMF said.

El Salvador’s so-called bitcoin law took effect in September 2021, making it the first country to adopt bitcoin as an alternative legal tender. The IMF seeks to explore policies with the Salvadoran authorities to stabilize the nation’s economy, including proposals on managing risks associated with bitcoin.

“On bitcoin, while many of the risks have not yet materialized, there is joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the Bitcoin project. Additional discussions in this and other key areas remain necessary,” the IMF said in August.

Also in August, Nayib Bukele, president of El Salvador, who passed the bill to legalize bitcoin as legal tender, said the monetary experiment has had mixed results. Bukele added that bitcoin has seen limited domestic adoption but remains a “net positive” for the country.


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About Author

Timmy Shen is an Asia editor for The Block. Previously, he wrote about crypto and Web3 for Forkast.News from Taiwan after spending more than three years in Beijing covering finance, entertainment business and current affairs at Caixin Global and Chinese tech at TechNode. His China-related reporting has also appeared in The Guardian. When he's not chasing headlines, you'll find him savoring hot pot and shabu shabu in a Taipei local haunt. Timmy holds an MS degree from Columbia University Graduate School of Journalism. Send tips to [email protected] or get in touch on X/Telegram @timmyhmshen.

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