The international financial institution is reheating old warnings, once again declaring that recognizing Bitcoin as a national currency is a “non-advisable shortcut.”

Bitcoin (BTC), the world’s largest cryptocurrency, will be launched as legal tender in El Salvador in seven days. But as the Central American country goes through the final days of preparation and is eagerly watched by other countries – including potential imitators – the International Monetary Fund (IMF) renews its warning on Twitter.

Together with the World Bank, the intergovernmental financial institution has expressed its disapproval of El Salvador’s crypto legislation from the start. The IMF warns of the economic and legal risks that threaten the country if Bitcoin becomes an official legal tender.

A step too far

The IMF in its latest IMF warning (posted on Twitter – with a link to last month’s blog):

“Privately issued crypto assets like Bitcoin come with significant risks. To equate it with a national currency is an unadvisable abbreviation.“

The blog post, written by Tobias Adrian, director of the Money and Capital Markets department, and Rhoda Weeks – Brown, head of the legal department, describes a series of” risks that threaten countries that choose to legalize privately issued tokens ” as a national currency.

The authors acknowledge the “advantages of the underlying technologies”. However, they insist that cryptocurrencies should not be adopted to such an extent, as this is a “step too far”.

In most cases, the risks of such an introduction would outweigh its benefits, the authors warn. They emphasize that the recognition of Bitcoin as a national currency poses a threat to financial integrity in countries with weak anti-money laundering and terrorist financing (AML/CFT) measures.

A “not advisable abbreviation”

While most of the blog is devoted to warnings about financial and legal risks associated with the adoption of Bitcoin, the authors also address the looming environmental and economic dangers.

Adrian and Weeks-Brown emphasize the negative environmental impact of Bitcoin mining. That would consume” an enormous amount of electricity.” And they warn that the introduction of cryptocurrencies could jeopardize consumer protection and have a negative impact on domestic prices.

According to the IMF, the introduction of Bitcoin as a national currency represents “an unrecommendable shortcut” for a way out of the economic crisis.

The introduction of Bitcoin can be a quick and effective solution for the currently troubled economies, as it eliminates the high cost of remittances, allows financial integration of citizens without a bank account, attracts foreign investors, and in some cases avoids burdensome sanctions.

El Salvador’s President Nayib Bukele, who brought the law through parliament in June, comments: He does not shed tears over the IMF’s rejection.

After the IMF’s initial warnings, Bukele said that nothing will stop the introduction of Bitcoin in El Salvador. And so far, that’s true.

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Text credit: Cryptoslate

Last updated on August 31, 2021

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