IMF Recommends El Salvador to Revise Bitcoin Legislation

The International Monetary Fund (IMF) 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, stated during a press briefing on Thursday that the Fund is in ongoing talks with Salvadoran authorities. She emphasized that “Addressing risks arising from Bitcoin is a key element of these discussions.”

Kozack outlined the IMF’s recommendations, which include:
– Narrowing the scope of the bitcoin law
– Strengthening the regulatory framework and oversight of the bitcoin ecosystem
– Limiting public sector exposure to bitcoin

The IMF aims to establish a new program that supports macroeconomic stabilization and growth-enhancing reforms in El Salvador. This initiative follows an August statement highlighting fiscal concerns related to bitcoin.

According to the IMF, progress is being made towards a Fund-supported program focused on:
– Strengthening public finances
– Boosting bank reserves
– Improving governance and transparency
– Mitigating risks associated with bitcoin

Since the bitcoin law took effect in September 2021, making El Salvador the first country to adopt bitcoin as legal tender, the IMF has sought to work with Salvadoran authorities on policies to stabilize the economy.

The IMF also noted in August that while many risks associated with bitcoin have not yet manifested, further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks.

In August, Nayib Bukele, the president of El Salvador who supported the bitcoin law, remarked on the mixed results of the monetary experiment, stating that while domestic adoption has been limited, it remains a “net positive” for the country.