The government of the president Nayib B Watch defended on Monday the right to maintain bitcoin as legal tender in El Salvador, despite warnings from the IMF to stop doing it.
“No multilateral organization is going to force you to do anything, absolutely nothing. States are sovereign States and make sovereign decisions about their public policies,” Finance Minister Alejandro Zelaya told local television channel 21.
In a report last Tuesday and later in a statement, the IMF urged the Salvadoran authorities to “limit the scope of the bitcoin law eliminating its status as legal tender”.
Minister @AlejandroZelay9: “There is no risk of non-payment in the country, El Salvador has not failed to comply with any of its international or national debt commitments and we will continue like this.” pic.twitter.com/MmGaq7cIr6
– Ministry of Finance (@HaciendaSV)
January 31, 2022
In that report, the IMF’s executive board called on the Salvadoran government to officially stop using bitcoin, citing dangers to “financial stability, financial integrity, and consumer protection, as well as possible fiscal contingencies.”
For Zelaya, “it is false” that the IMF report asks to “eliminate” the bitcoin as legal tender, but proposes to “limit” its scope.
In September 2021, El Salvador legalized bitcoin as one of its currencies, on par with the dollar.
At that time a bitcoin was equivalent to about 44,000 dollars. It then traded above $61,000 in October. Even in November, Bukele began the construction of a public veterinary with the profits generated.
However, bitcoin fell and is currently trading around $38,000.
The IMF also expressed, according to the statement, “its concern about the risks associated with the issuance of bonds backed by bitcoin.”
But Zelaya maintained that this plan was still in place.
“In the first 15 days of March we are scheduled to finish everything necessary for the issue of the bono (bitcoin), we are taking all the safeguards (…),” Zelaya explained.
“There is regulation for this (bond issue). All risks have been measured and work has been done on each of them to minimize them,” he added.
Despite the differences, according to Zelaya, El Salvador “continues to negotiate” with the IMF a $1.3 billion deal to clean up their coffers and admits that bitcoin “is a risk analysis and mitigation factor, like anything else”.
El Salvador seeks this agreement in exchange for a fiscal adjustment equivalent to 4% of GDP for the next three years. The deal was due to close in September 2021.
“Everything seems to indicate that the Fund has expressed that the elimination of bitcoin as legal tender is indeed a point of honor for the IMF, so that the Salvadoran government can negotiate an agreement with said institution,” the economist considered in a recent article. Luis Membreno.
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