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Bitcoin in El Salvador

12 Oct 2022   author: Boruya

The International Monetary Fund (IMF) does not see a threat to financial stability from cryptocurrencies in the case of El Salvador.

After El Salvador introduced bitcoin as a legal payment instrument, the International Monetary Fund has made its attitude towards BTC very clear. The IMF even called on El Salvador to abolish the digital asset as its official currency in order to satisfy a request for government funding.

El Salvador
El Salvador

According to the IMF, bitcoin will jeopardize the financial stability of the country. The IMF commented on the current economic situation, which cannot be positive due to rising inflation and fears of recession. Here, the International Monetary Fund also drew attention to the danger that the crypto market can pose to the entire financial system.

The crypto sector as a whole does not threaten financial stability

Current concerns about the financial system are mainly related to factors such as the possibility of a recession or high inflation. The main reason for this is the coronavirus pandemic and the result of the escalation of the Russian-Ukrainian conflict.

On the contrary, with assets like bitcoin, the crypto market will not be a cause for concern. Even the strong sales of recent months, which have put numerous crypto companies on the verge of collapse due to insufficient risk management, are unlikely to affect the stability of the entire financial market.

Here the IMF seems to be showing a change of heart. In the past, the International Monetary Fund has criticized bitcoin and the rest of the crypto market mainly due to high volatility.

In April, for example, the IMF called for much stricter regulation of cryptocurrencies, allegedly to be used primarily for corruption. The IMF derived these findings using data from the Statista platform. But the International Monetary Fund itself acknowledged in the report that the data needed to be carefully analyzed due to the small sample size.

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