{"id":1533,"date":"2022-01-30T19:58:18","date_gmt":"2022-01-30T19:58:18","guid":{"rendered":"https:\/\/cryptoheretostay.com\/?p=1533"},"modified":"2022-01-30T19:58:18","modified_gmt":"2022-01-30T19:58:18","slug":"imf-tells-el-salvador-costs-of-making-bitcoin-legal-tender-exceed-potential-benefits","status":"publish","type":"post","link":"https:\/\/cryptoheretostay.com\/?p=1533","title":{"rendered":"IMF Tells El Salvador: Costs of Making Bitcoin Legal Tender Exceed Potential Benefits"},"content":{"rendered":"<p> <script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"crypto\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<\/p>\n<p><strong>The International Monetary Fund (IMF) has told El Salvador that the costs of implementing the country\u2019s Bitcoin law, which makes the cryptocurrency legal tender, exceed the potential benefits. The IMF has also urged El Salvador to dissolve the \u201cFidebitcoin\u201d trust fund and start charging fees for services provided by the government\u2019s Chivo digital wallet.<\/strong><\/p>\n<h2>IMF\u2019s Recommendations for El Salvador<\/h2>\n<p>The International Monetary Fund (IMF) published a 114-page report on El Salvador Friday with a dedicated section on bitcoin as legal tender and the government\u2019s Chivo digital wallet \u201cas a new means of payments.\u201d<\/p>\n<p>El Salvador became the first country to adopt bitcoin as an official currency with legal tender status alongside the U.S. dollar in September last year. The IMF report notes that the Salvadoran government\u2019s Chivo wallet, which can be used for dollars and BTC, has \u201camassed a sizeable number of clients, 3.8 million, although it is unclear how many are using bitcoin in their transactions or holding balances in bitcoin.\u201d<\/p>\n<p>The report explains that under El Salvador\u2019s Bitcoin law, \u201ca trust fund, Fidebitcoin, endowed with US$150 million has been established to guarantee the conversion\u201d between bitcoin and dollars. The funds have been primarily used to finance the launch of Chivo, the report states.<\/p>\n<p>According to the IMF:<\/p>\n<p>In the near-term, the actual costs of implementing Chivo and operationalizing the Bitcoin law exceed potential benefits.<\/p>\n<p>The IMF estimates that the short-term budgetary costs are 1% of GDP for 2021-2022 while near-term gains may measure up to \u00bc% of GDP per year.<\/p>\n<p>The report also outlines the risks of adopting bitcoin as legal tender, stating:<\/p>\n<p>By adopting bitcoin as legal tender considerable risks are introduced to financial stability, financial and market integrity, and consumer protection \u2026 If the use of bitcoin increases significantly, it can risk the dollarization regime that has proven to be [a] successful nominal anchor for the economy.<\/p>\n<p>To \u201caddress the risks from using bitcoin as legal tender,\u201d the IMF recommends \u201cnarrowing the Bitcoin law\u2019s scope, at the minimum by removing bitcoin\u2019s legal tender status, and making explicit its strictly voluntary nature for all type of transactions.\u201d<\/p>\n<p>The International Monetary Fund added that \u201cThree other areas require prompt corrective measures.\u201d Two of the areas are \u201cDeveloping strict Chivo\u2019s regulatory oversight\u201d and \u201cSafeguarding financial stability and adapting the banking regulatory frameworks.\u201d<\/p>\n<p>The third area that needs immediate corrective measures is \u201cContaining the budgetary costs.\u201d For this, the IMF wrote:<\/p>\n<p>Staff recommends \u2026 making Chivo a self-funded company (charging fees for services provided). Staff also recommends ending US$30 subsidy to every new Chivo user and liquidating Fidebitcoin \u2014 returning unused funds to the Treasury.<\/p>\n<p><em><strong>What do you think about the IMF\u2019s recommendations for El Salvador? Let us know in the comments section below.<\/strong><\/em><\/p>\n<p>Kevin Helms <\/p>\n<p class=\"article__body__author__info__about\">\nA student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.<\/p>\n<p><i class=\"td-icon-font td-icon-mail-1\"\/><\/p>\n<p class=\"images_credits\"><em>Image Credits: Shutterstock, Pixabay, Wiki Commons<\/em><\/p>\n<p><strong>Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<p>More Popular NewsIn Case You Missed It<\/p>\n<p><script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"bitcoin\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<br \/><a href=\"https:\/\/news.bitcoin.com\/imf-tells-el-salvador-costs-of-making-bitcoin-legal-tender-exceed-potential-benefits\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The International Monetary Fund (IMF) has told El Salvador that the costs of implementing the country\u2019s Bitcoin law, which makes the cryptocurrency legal tender, exceed the potential benefits. The IMF has also urged El Salvador to dissolve the \u201cFidebitcoin\u201d trust fund and start charging fees for services provided by the government\u2019s Chivo digital wallet. IMF\u2019s [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1534,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_wp_rev_ctl_limit":""},"categories":[1],"tags":[],"class_list":["post-1533","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto-updates"],"_links":{"self":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/1533","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1533"}],"version-history":[{"count":1,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/1533\/revisions"}],"predecessor-version":[{"id":1535,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/1533\/revisions\/1535"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/media\/1534"}],"wp:attachment":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1533"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1533"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1533"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}