The International Monetary Fund’s board urged El Salvador to do away with its move to make bitcoin a legal tender while calling for strict regulation of the country’s e-wallet. IMF board members “urged the authorities to narrow the scope of the Bitcoin law by removing bitcoin’s legal tender status,” the IMF said in a Tuesday statement following a yearly consultation.
The IMF has repeatedly asked El Salvador to reverse its bitcoin law.
In September, El Salvador became the first country to make bitcoin a legal tender, alongside the U.S. dollar. The Central American country’s economy has been dollarized for two decades. The IMF has repeatedly called for the move to be reversed, citing financial, economic, and legal concerns. The IMF board said it was important to boost financial inclusion and that the Chivo e-wallet, the government’s bitcoin exchange, could play this role. However, they see “the need for strict regulation and oversight of the new ecosystem.”
El Salvador is preparing the issuance of $1 billion in bonds to buy bitcoin.
Some of the board members also expressed concern about the risks associated with El Salvador’s expected issuance of bitcoin-linked bonds, the IMF said. The country is preparing to issue $1 billion in bonds, half of which would be used to purchase bitcoin. The government bets that the exposure to bitcoin gains will entice investors who would receive a dollar yield of 6.5%, much lower than what the market currently prices for similar Salvadoran government debt, closer to 17%.
The IMF also warned that at current debt spending levels, El Salvador’s public debt could rise to about 96% of GDP in 2026, calling it an “unsustainable path.”