IMF and Bank of England Governor Andrew Bailey Expressed Some Serious Concerns Over El Salvador’s Bitcoin adoption.
El Salvador became the first country in the world to adopt Bitcoin as a legal tender in September. However, the International Monetary Fund (IMF) has warned of the risks to financial integrity, consumer protection, and financial stability
“Given Bitcoin’s high price volatility, its use as a legal tender entails significant risk to consumer protection, financial integrity, and financial stability,” IMF said in a statement, adding its use also “gives rise to fiscal contingent liabilities.”
The IMF statement comes just days after Nayib Bukele, the Bitcoin-friendly president of El Salvador, said at a Bitcoin investment summit on Saturday that his country plans to build the first “Bitcoin City”.
The city will be located in the eastern department La Unión, between the municipalities of La Unión and Conchagua.
The initial costs for developing the so-called “Bitcoin City” will be funded at the outset by the issuance of Bitcoin-backed billion-dollar bonds in 2022.
The government deposited $30 as ‘seed money in every El Salvadorean’s Chivo wallet to propel bitcoin transactions. By the end of September, nearly three million people (over 45 percent of the population) had downloaded the Chivo. IMF warned the see-sawing prices of Bitcoin could lead to losses in wealth for businesses and households.
On the other side, Bank of England governor Andrew Bailey also has expressed concerns over El Salvador’s adoption of Bitcoin (BTC) as legal tender.
Bailey argued that El Salvador’s decision to adopt Bitcoin as a currency was alarming because consumers are likely to suffer from the cryptocurrency’s extreme volatility.
Trading around $43,000 on the first day of El Salvador’s Bitcoin adoption as legal tender, Bitcoin surged to a new historical high above $68,000 on Nov. 9. BTC’s price has significantly tumbled since then, with Bitcoin trading at $54,626 at the time of writing.
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