Crypto wrap: IMF warns El Salvador against using bitcoin as legal tender

Soon after El Salvador's President Nayib Bukele announced plans for the world's first Bitcoin city, powered by a volcano and financed by cryptocurrency bonds, the International Monetary Fund (IMF) recommended that the country stop using Bitcoin as legal tender, citing financial and consumer risks associated with the cryptocurrency. El Salvador, which has relied on the US dollar as its principal currency for more than two decades, legalized Bitcoin as an official money in September and has reaped the benefits.

The IMF noted in a statement that Bitcoin and cryptocurrencies in general might help with efficient payments, but that making them legal money would likely jeopardize financial stability. "Because of Bitcoin's tremendous price volatility, it poses major threats to consumer protection, financial integrity, and financial stability if it is used as legal money. It also creates fiscal contingent liabilities as a result of its use. Bitcoin should not be utilized as a legal tender because of these hazards. The staff proposes restricting the scope of the bitcoin law and bolstering the new payment ecosystem's regulation and oversight "In a statement, the IMF added.