• The International Monetary Fund (IMF) is closely watching El Salvador’s usage of Bitcoin as a legal tender.
• Despite the risks associated with its usage, El Salvador has declared Bitcoin to be a legal tender and businesses must accept it alongside USD.
• The IMF has cautioned El Salvador against expanding government exposure to bitcoin and believes tokenized bonds based on bitcoin could arise in the next few months.

El Salvador Makes History With Bitcoin

El Salvador recently made history when it declared that Bitcoin would become legal tender for all goods and services within the country. This move came with its own set of risks, but so far El Salvador has been standing on its own two feet since making this decision in September 2021.

The International Monetary Fund’s Concerns

The International Monetary Fund (IMF) is not comfortable with El Salvador’s decision to make Bitcoin a legal tender, citing potential fiscal fragility and speculative nature of crypto markets as reasons why it should reconsider their plans for expanding government exposure to Bitcoin. The IMF is also predicting that tokenized bonds based on Bitcoin may arise in the coming months due to how strict the utilization of BTC has become in El Salvador.

Bitcoin Reaches an All-Time High

Just two months after declaring BTC as a legal tender, the currency reached an all-time high of approximately $68,000 per unit before dropping significantly to around $21,000 at present time. This drop in value has hit El Salvador hard and caused some concern among those who believed they were taking an unnecessary risk by making such a bold declaration about BTC usage within their country.

The World Bank Refuses Aid

The World Bank refused to aid El Salvador’s agenda towards using BTC as a form of payment due to their belief that it is too speculative for serious consideration. Nevertheless, El Salvador continues its stance on using BTC as legal tender despite warnings from institutions like the IMF and World Bank which are both keeping close tabs on their developments regarding this matter.

Conclusion

It remains unclear whether or not declaring BTC as a legal tender was ultimately beneficial for El Salvadoreans or if there will be any consequences arising from this move down the road. For now, both institutions like the IMF and World Bank are keeping watchful eyes over how this situation unfolds in order to ensure that any potential risks associated with using cryptocurrency do not become realities later down the line.