Risks associated with El Salvador’s adoption of bitcoin “have not materialized,” the International Monetary Fund (IMF) said, but the organization warned against further exposure.
“Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to bitcoin,” the IMF said in a statement.
The yearly visit by IMF experts followed El Salvador’s payment of $600 million in bonds last month amid investor concerns about its financing sources and budgetary policy.
In the past, the so-called “article IV” visit of the IMF has been extremely negative. In September 2021, El Salvador will make bitcoin legal tender, essentially closing the doors to IMF financing.
While the lender acknowledged that dangers “have not materialized due to the limited bitcoin use so far,” it stated that the cryptocurrency’s “use could grow given its legal tender status and new legislative reforms to encourage the use of crypto assets, including tokenized bonds.”
The Congress of El Salvador passed a bill governing the issuing of digital assets by both governmental and commercial enterprises last month.
Before mid-November, when he indicated the Treasury would buy one bitcoin each day, President Nayib Bukele announced on Twitter a series of transactions totaling approximately 2,380 bitcoin.
If these acquisitions were executed, the government would possess approximately 2,470 coins acquired for approximately $106.4 million. This investment’s current value is $52.2 million, representing a paper loss of nearly 50 percent.