IMF Issues Warning on El Salvador’s Bitcoin Strategy

The International Monetary Fund (IMF) has once again turned its attention to El Salvador, urging the nation to enhance its regulatory framework regarding Bitcoin.

During a recent press conference, Julie Kozack, head of the IMF’s communication department, reiterated the organization’s recommendations, which include narrowing the Bitcoin law’s scope, bolstering regulatory oversight of the Bitcoin ecosystem, and limiting the public sector’s involvement with the cryptocurrency.

Despite the country’s adoption of Bitcoin as legal tender in 2021 and a current annual GDP growth rate of 3%, the IMF’s call for regulatory improvements reflects an ongoing concern over the risks associated with cryptocurrency. This latest push mirrors sentiments expressed by the IMF last August, when it discussed progress in negotiations aimed at improving El Salvador’s public finances, increasing bank reserves, and enhancing governance and transparency.

While the IMF has softened its tone regarding Bitcoin, it continues to emphasize the need for greater transparency and measures to safeguard fiscal and financial stability. However, these comments do not signal a full endorsement of Bitcoin; instead, they illustrate a more balanced and cautious approach compared to earlier critiques.

On the other hand, El Salvador’s President Nayib Bukele has expressed some disappointment regarding the level of Bitcoin adoption within the country. In an August 2024 interview with TIME, Bukele acknowledged that the uptake of Bitcoin has not reached the levels he initially anticipated.

He had hoped that more citizens would embrace his vision for Bitcoin, particularly given the potential financial benefits since its adoption in 2021. Nevertheless, Bukele remains proud of his decision to allow Salvadorans to choose their own paths regarding Bitcoin adoption, rather than imposing it upon them.