Tag: IMF

IMF: Latin America and the Caribbean Embrace CBDC and Crypto Assets

by Blockchain News

Interest in central bank digital currencies (CBDCs) is on the rise in Latin America and the Caribbean (LAC), with several countries making significant advancements in their adoption, according to IMF. While El Salvador gained attention for legalizing Bitcoin as a form of payment, other LAC nations are exploring CBDCs to enhance financial inclusion, lower cross-border remittance costs, and strengthen payment systems.

The Bahamas took the lead in 2020 by introducing the Sand Dollar, the world’s first CBDC. Following suit, the Eastern Caribbean Currency Union (ECCU) and Jamaica have also launched their own CBDCs. Meanwhile, Brazil is in the advanced Proof-of-Concept stage for its CBDC project, aiming to tokenize assets such as real estate, stocks, and commodities to increase liquidity and facilitate transfers.

In addition to CBDCs, crypto asset adoption in LAC has been noteworthy. Brazil, Argentina, Colombia, and Ecuador ranked among the top 20 countries globally in crypto asset adoption. These countries are attracted to the potential benefits offered by digital assets, including protection against macroeconomic uncertainties, improved financial inclusion for the unbanked, faster and cheaper payments, and increased competition.

However, the adoption of crypto assets also comes with challenges and risks, particularly for LAC countries with a history of macroeconomic instability, low institutional credibility, and extensive informal sectors. To address these risks, regulatory frameworks for crypto assets vary across LAC countries. While El Salvador has embraced Bitcoin as legal tender, other nations such as Argentina and the Dominican Republic have banned their use due to concerns about financial stability, tax evasion, corruption, and money laundering.

El Salvador’s experience with Bitcoin highlights the risks associated with unbacked crypto assets, as their value relies solely on supply and demand, leading to significant price volatility. Despite being declared legal tender, Bitcoin has not gained widespread acceptance as a medium of exchange in El Salvador. This indicates the need for effective regulation and oversight.

Stablecoins, another type of crypto asset, also present challenges. Meta’s pilot project aimed to enable domestic and cross-border payments without fees using its digital wallet, Novi. However, the project faced regulatory pushback and the risk of domestic currency substitution in Guatemala, leading to its discontinuation in 2022.

In response to the growing interest in CBDCs and crypto assets, most central banks in LAC are exploring the potential introduction of CBDCs. Retail CBDCs, designed for the general public, are viewed as a means to enhance payment systems, improve financial inclusion, and maintain monetary sovereignty. The ECCU and the Bahamas have already issued their own CBDCs, focusing on financial inclusion in remote areas and strengthening payment system resilience during crises. However, slow adoption and access disruptions have highlighted the importance of public awareness campaigns and robust infrastructure to promote CBDC usage.

To effectively manage the risks associated with crypto assets, the IMF recommends implementing appropriate policies that strike a balance between risk mitigation and technological innovation. Well-designed CBDCs have the potential to enhance payment system efficiency, resilience, and financial inclusion in LAC.

As LAC countries navigate the complexities of digital currencies, striking the right regulatory balance will be crucial. By fostering financial inclusion, improving payment systems, and addressing the drivers of crypto asset demand, LAC nations can leverage CBDCs and effectively regulate crypto assets to pave the way for a digital and inclusive financial future in the region.

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IMF Prioritizes Regulation over Ban on Crypto

by Blockchain News

The International Monetary Fund (IMF) has expressed its preference for regulating crypto assets, including stablecoins, rather than imposing an outright ban. IMF’s Managing Director, Kristalina Georgieva, stated during the G20 finance ministers meetings in Bengaluru, India that differentiating and regulating digital assets are the agency’s top priorities. However, the IMF has not ruled out the option of banning cryptocurrencies entirely if they pose a significant risk to financial stability.

In a recent interview with Bloomberg, Georgieva said that much confusion still exists around the classification of digital money. The IMF’s first objective is to differentiate between central bank digital currencies (CBDCs) that are backed by the state and publicly issued crypto assets and stablecoins. Fully-backed stablecoins can create a “reasonably good space for the economy,” while non-backed crypto assets are speculative, high risk, and not money.

Georgieva cited a recent paper recommending global regulatory standards for crypto assets, which stated that they cannot be legal tender because they are not backed. However, if crypto assets begin to pose a greater risk to financial stability, the IMF would not rule out the option of banning them. Nevertheless, Georgieva emphasized that good regulations, predictability, and consumer protection would be the better approach, and banning would not need to be considered.

Georgieva explained that an inability to protect consumers from the rapidly evolving world of crypto assets would be the primary catalyst for banning cryptocurrencies. The IMF, the Financial Stability Board, and the Bank for International Settlements are jointly preparing to release regulatory framework guidelines in the second half of this year.

The IMF’s stance on regulating crypto assets aligns with other global regulators, such as the G20, which also support establishing a regulatory framework for digital currencies. Some countries, including China and India, have taken a more aggressive approach and banned cryptocurrency trading altogether. In contrast, countries such as the United States and Switzerland have implemented a regulatory framework for digital assets, aiming to balance innovation and investor protection.

The cryptocurrency market has experienced significant growth in the last decade, with the emergence of Bitcoin and the subsequent proliferation of other cryptocurrencies. The total market capitalization of cryptocurrencies has surpassed $2 trillion, attracting the attention of investors and regulators worldwide. However, the market’s volatility and the lack of regulatory clarity have raised concerns about the potential risks associated with investing in digital assets.

In conclusion, the IMF supports regulating the world of digital money and aims to differentiate between CBDCs and crypto assets to establish a regulatory framework for digital currencies. While the agency has not ruled out banning cryptocurrencies entirely, it would prefer to pursue good regulations, predictability, and consumer protection. The upcoming regulatory framework guidelines, jointly prepared by the IMF, the Financial Stability Board, and the Bank for International Settlements, are expected to provide a comprehensive regulatory framework for crypto assets.

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IMF Urges Countries to Consider Banning Cryptocurrencies

by Blockchain News

During a meeting of the Group of Twenty (G20) that took place on February 25, United States Treasury Secretary Janet Yellen emphasized how important it was to develop a robust regulatory framework for cryptocurrencies.

Yellen stated it was “essential to put in place a solid regulatory framework” while she was speaking to Reuters. In addition to this, she emphasized that the United States is not advocating for a “absolute prohibition on crypto activity.”

Yellen’s comments follow earlier ones made by the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, who stated that prohibiting cryptocurrencies should be an option: “There has to be very strong push for regulation… if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk.” Yellen’s comments follow Georgieva’s earlier statements.

In addition, Georgieva emphasized to the media that it is essential to distinguish between stablecoins and cryptocurrencies, which are issued by private enterprises, and central bank digital currencies (CBDCs), which are issued by central banks.

Nirmala Sitharaman, who serves as India’s Minister of Finance, has advocated for a unified approach to be taken at the international level to deal with the widespread economic effects of crypto assets. Throughout her time in office, Sitharaman has been a proponent of developing cryptocurrency legislation in collaboration with other governments. For a number of years, the government of India has been debating whether cryptocurrencies should be regulated or outright prohibited.

The International Monetary Fund (IMF) on February 23 issued a plan of action on crypto assets, in which it urged governments to remove cryptocurrencies from their status as legal cash. A framework of nine policy principles that addresses macrofinancial, legal and regulatory, and international coordination challenges was detailed in the study that was named “Elements of Effective Policies for Crypto Assets.”

Following a visit to El Salvador earlier this month, the International Monetary Fund (IMF) made a recommendation to the nation that it reconsider its plans to increase its exposure to Bitcoin. The IMF made this recommendation citing the risk that cryptocurrencies pose to El Salvador’s ability to maintain its fiscal sustainability, protect its consumers, and maintain its financial integrity and stability.

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As crypto grows across Africa, IMF asks for greater regulation

by Blockchain News

According to a blog post published by a worldwide organization on November 22nd, the International Monetary Fund (IMF) is advocating for more regulation of crypto exchanges in Africa, which is one of the markets with the highest growth rate in the world.

The collapse of FTX and the subsequent effect it had on the prices of cryptocurrencies is “prompting renewed calls for greater consumer protection and regulation of the crypto industry. ” according to the International Monetary Fund (IMF), one of the reasons why countries in the region should embrace regulation. The IMF cited this as one of the reasons why countries in the region should embrace regulation.

In addition, the authors claim that “risks from crypto assets are evident” and that “it’s time to regulate” in order to establish a balance between avoiding risk and making the most of innovation.

The article, which is based on the Regional Economic Outlook for sub-Saharan Africa for October 2022, warns that “risks are much greater if crypto is adopted as legal tender” which poses a danger to public finances if governments accept crypto as a form of payment. 

According to the statistics provided by the IMF, just one quarter of the nations located in sub-Saharan Africa have explicitly controlled cryptocurrencies, while the remaining two thirds have adopted certain limitations.

On the other side, Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of the Congo have already prohibited the use of crypto assets. This accounts for twenty percent of the nations that are located in the sub-Saharan region.

The biggest concentrations of users may be found in the countries of Kenya, Nigeria, and South Africa.

According to statistics provided by the analytics company Chainalysis, the value of Africa’s cryptocurrency market surged by more than 1,200% between July 2020 and June 2021. The growth was driven mostly by increasing adoption in Kenya, South Africa, Nigeria, and Tanzania.

According to a report by Cointelegraph, Ghana is conducting tests for a digital currency that would be issued by the central bank (CBDC).

In Chainalysis’ Global Crypto Acceptance Index, Kenya and Nigeria were placed 11th and 19th respectively. Ghana has the potential to attain levels of cryptocurrency adoption comparable to those of Kenya and Nigeria.

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Nearly 100 Countries are Developing their CBDC by July – IMF

by Blockchain News

According to the International Monetary Fund (IMF) report, as of July 2022, nearly 100 central bank digital currencies (CBDCs) are in the research or development stage around the world.

The International Monetary Fund (IMF) is headquartered in Washington D.C., consisting of 190 countries that aim to foster global monetary cooperation. The IMF was formed in 1944 at the Bretton Woods Conference.

At present, two CBDCs are fully launched, namely, the Nigerian eNaira launched in October 2021 and the Bahamas Sand Dollar launched in October 2020.

CBDC stands for Central Bank Digital Currency and represents the digital form of a nation’s fiat money (currency backed by trust or faith in the regulating government). As such, it is controlled directly by the country’s central bank and is backed by national credit and government power.

Many dignitaries, including IMF Vice President Zhang Tao, believe that CBDC is an efficient payment system that will drive financial inclusion for those excluded from the ecosystem for a variety of reasons

There are still 1.7 billion unbanked people in the world.

Serving the unbanked and underbanked population is the main driver behind the Caribbean nation of the Bahamas’ plan to issue a digital version of its national currency, the Sand Dollar, by October 2020.

The IMF stated that CBDC can create greater flexibility for domestic payment systems, promote competition, facilitate access to funds, improve payment efficiency, and thereby reduce transaction costs. CBDCs can also increase the transparency of money flows.

The IMF pointed out that central banks need to assess risks before issuing CBDC, and at the same time strengthen the ability of cyber-attack risks, so as to protect the property security and privacy security of people in their own countries.

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Correlation Between Performance of Equity Markets and Crypto Assets in Asia Increased: the IMF

by Blockchain News

The correlation between the performance of Asia’s equity markets and crypto assets has increased as investors from that region piled into crypto in recent years, according to a blog from the International Monetary Fund (IMF).

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The IMF said that the returns and volatility correlations between Bitcoin and Asian equity markets have increased significantly since 2020, before the pandemic.

Currently, in Asia, the return correlations of Bitcoin and Indian stock markets have increased by 10-fold over the pandemic. This signifies limited risk diversification benefits of crypto, according to the IMF.

Risk sentiment among the crypto and equity markets could see a possible rise as the volatility correlations have increased by 3-fold.

“Crypto trading, however, soared as millions stayed home and received government aid, while low-interest rates and easy financing conditions also played a role,” the IMF said.

According to the IMF, the inclusion of the growing acceptance of crypto-related platforms and investment vehicles in the stock market and the over-the-counter market could be the possible factors that have led to an increased interconnectedness of crypto and equity markets in Asia.

The IMF stated that their research showed that the rise in crypto-equity correlations in Asia also led to a sharp increase in crypto-equity volatility spillovers in India, Vietnam and Thailand.

Following the spread of crypto globally, authorities in Asia have turned increasingly sensitive and alert to the growing risks posed by this phenomenon.

To do so, authorities have increased focus on crypto regulation, and the building regulatory framework is under construction, including in those countries mentioned above.

“A significant effort is also needed to address important data gaps that still prevent domestic and international regulators from fully understanding ownership and use of crypto and its intersection with the traditional financial sector,” the IMF said.

The IMF backs the idea of clear guidelines on regulated financial institutions and seeks to inform and protect retail investors.

“Regulatory frameworks for crypto in Asia should be tailored to the main uses of such assets within the countries,” the IMF said.

The IMF also added that crypto regulation should be closely coordinated across jurisdictions to be powerfully effective.

The total market value of the world’s crypto assets in December was $3 trillion – a surge of 20-fold in just a year and a half. However, it then plunged to less than $1 trillion in June as central bank interest rate increases to contain inflation ended easy access to cheap borrowing.

The IMF has also warned nations to desist from adopting Bitcoin as their legal tender against central bank-issued money.

According to a May 9 report from Blockchain.News, the IMF has stated that crypto assets are an anti-establishment movement threatening the power of central banks and their monopoly control of the money supply. The global financial body warned of large risks associated with Bitcoin use on consumer protection, financial stability, and financial integrity.

Kristalina Georgieva, the IMF Managing Director, has said that it is not advisable for countries to embrace cryptocurrency as money in the economy.

However, Georgieva has identified the Central Bank Digital Currency (CBDC) as the best innovation for a country’s financial system. “The future of money is a central topic at the IMF’s Spring Meetings,” the executive stated as she warned that using volatile crypto coins as money is not advisable.

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IMF Warns Countries against Adopting Cryptocurrency as Money

by Blockchain News

The International Monetary Fund (IMF) has warned nations to desist from adopting Bitcoin as their legal tender against central bank-issued money.

While speaking at IMF Spring Meetings on Friday, Kristalina Georgieva, the IMF Managing Director, said that it is not advisable for countries to embrace cryptocurrency as money in the economy.

Georgieva’s statement comes from a number of emerging markets including the Central Africa Republic and El Salvador both of whom have officially declared Bitcoin as a legal tender alongside their country’s fiat.

Both Central Africa Republic and El Salvador adopted the cryptocurrency to support their domestic currency and sustain their economy by attracting Bitcoin users to their countries for business transactions and tourism.

IMF stated that crypto assets are an anti-establishment movement that threatens the power of central banks and their monopoly control of the money supply. The global financial body warned of large risks associated with Bitcoin use on consumer protection, financial stability, and financial integrity.

However, Georgieva identified the Central Bank Digital Currency (CBDC) as the best innovation for a country’s financial system. “The future of money is a central topic at the IMF’s Spring Meetings,” the executive stated as she warned that the use of volatile crypto coins as money is not advisable.

Late last month, The Central African Republic (CAR) adopted Bitcoin as a legal tender, becoming the second nation in the world to do so after El Salvador. CAR lawmakers unanimously adopted a bill that made Bitcoin a legal tender alongside the official fiat currency – the CFA franc – and legalized the use of cryptocurrencies.

In September last year, El Salvador became the world’s first adopter of the pioneering digital currency. Under it, citizens of the Central American country were allowed to use the virtual currency – along with the US dollar which has been the official currency for more than twenty years – to pay for any goods and services, using a cyber-wallet app called Chivo.

 

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IMF Warns Countries against Adopting Cryptocurrency as Money

by Blockchain News

The International Monetary Fund (IMF) has warned nations to desist from adopting Bitcoin as their legal tender against central bank-issued money.

While speaking at IMF Spring Meetings on Friday, Kristalina Georgieva, the IMF Managing Director, said that it is not advisable for countries to embrace cryptocurrency as money in the economy.

Georgieva’s statement comes from a number of emerging markets including the Central Africa Republic and El Salvador both of whom have officially declared Bitcoin as a legal tender alongside their country’s fiat.

Both Central Africa Republic and El Salvador adopted the cryptocurrency to support their domestic currency and sustain their economy by attracting Bitcoin users to their countries for business transactions and tourism.

IMF stated that crypto assets are an anti-establishment movement that threatens the power of central banks and their monopoly control of the money supply. The global financial body warned of large risks associated with Bitcoin use on consumer protection, financial stability, and financial integrity.

However, Georgieva identified the Central Bank Digital Currency (CBDC) as the best innovation for a country’s financial system. “The future of money is a central topic at the IMF’s Spring Meetings,” the executive stated as she warned that the use of volatile crypto coins as money is not advisable.

Late last month, The Central African Republic (CAR) adopted Bitcoin as a legal tender, becoming the second nation in the world to do so after El Salvador. CAR lawmakers unanimously adopted a bill that made Bitcoin a legal tender alongside the official fiat currency – the CFA franc – and legalized the use of cryptocurrencies.

In September last year, El Salvador became the world’s first adopter of the pioneering digital currency. Under it, citizens of the Central American country were allowed to use the virtual currency – along with the US dollar which has been the official currency for more than twenty years – to pay for any goods and services, using a cyber-wallet app called Chivo.

 

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IMF Calls for Global Govts to Keep a Check on Crypto

by Blockchain News

The International Monetary Fund (IMF) has advised international decision-makers to keep a check on crypto, following deepening concerns highlighted by the war in Ukraine, The Block reported.

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The IMF in its Global Financial Stability Report spoke about the potential use of crypto in the Russian war against Ukraine and the threat it poses to the stability of the existing financial systems. 

There has been an increased level of “cryptoization” of the global financial system amid the Ukrainian invasion by Russia and the COVID-19 pandemic, the IMF said.

The Block reported that although much of this is due to general trading activity, the IMF warned that it could be used to circumvent identification checks in capital flows, essentially, a means of anonymously transacting overseas.

Although the US and UK regulators have asked crypto firms to be vigilant, people may use non-compliant exchanges, mixers or other means to evade sanctions.

In order to tackle crypto-specific risks, the IMF has advised international governments to implement the Financial Action Task Force standards, which include a travel rule for crypto assets that require exchanges to transmit sender and recipient identification information; and also an implementation of additional laws and regulations on foreign exchange and capital flow management to cover crypto.

The report stated that “essential steps include developing a comprehensive, consistent, and coordinated regulatory approach to crypto assets, and applying it effectively to capital flow management measures; establishing international collaborative arrangements for implementation; addressing data gaps; and leveraging technology (“regtech” and “suptech”).”

The other aspect of the report spoke about decentralised finance (DeFi) space. It called the sector a new form of intermediary which poses a new set of legal questions that regulators need to tackle – importantly, how to regulate an entity that lacks a centralized point of contact.

“Regulation should focus on elements of the crypto ecosystem that enable DeFi, such as stablecoin issuers and centralized exchanges,” the report suggested. “Authorities should also encourage DeFi platforms to be subject to robust governance schemes, including industry codes and self-regulatory organizations. These entities could provide an effective conduit for regulatory oversight.”

In a similar report from January this year, the IMF showed concerns about the risks related to El Salvador’s issuance of bitcoin-backed bonds.

Blockchain.News reported that the IMF urged El Salvador to terminate bitcoin as legal tender as soon as possible.

The financial institution pointed to the high price volatility of Bitcoin as a major risk, noting that bitcoin should not be used as legal tender, the report added.

After bilateral talks between both sides, the IMF’s officials said “there are large risks associated with the use of bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities,” according to the report from CNBC.

In June last year, El Salvador became the first country to adopt bitcoin as legal tender, with 62 votes approval out of 84. In September, Bitcoin officially was circulated in this country as legal tender.

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Does the IMF have a hidden script for El Salvador’s Bitcoin play?

by Cointelegraph

On Jan. 25, the International Monetary Fund’s (IMF) directors asked El Salvador to “narrow the scope” of its Bitcoin Law by “removing Bitcoin’s legal tender status.” Adopting a cryptocurrency as the Central American country has done “entails large risks for financial and market integrity, financial stability and consumer protection,” the fund wrote.

Why did the IMF ask El Salvador to effectively pull the plug on its cryptocurrency experiment? Surely this small country — ranked 104th globally in gross domestic product (GDP) — is no threat to the international bank’s balance sheet. Moreover, 70% of El Salvador’s populace is unbanked, and one-fifth of its GDP is from United States remittances. Arguably, it could profit from Bitcoin’s (BTC) use.

Then again, it’s only been half a year since El Salvador declared Bitcoin legal tender — the world’s first nation to do so. Is that really enough time to draw any useful conclusions?

One objective of the IMF is “to ensure exchange [rate] stability,” Gavin Brown, associate professor in financial technology at the University of Liverpool, told Cointelegraph. Bitcoin and cryptocurrencies generally have exhibited extreme volatility, evident in the recent 50% drawdown from November’s record market prices. “This clearly gives a mandate for the IMF to be at best cautious of volatile monetary alternatives such as Bitcoin.”

Other motives

But that may not be the whole story. “The material impact of such a nation pivoting toward Bitcoin as they have done is in itself not a big deal,” Brown continued. “However, what is important is the signal that this sends to other nations should they [El Salvador] make a success of it.”

After all, more than 65 countries presently peg their currencies to the U.S. dollar, Brown noted. “This, along with the dollarization of oil and the strength of the U.S. economy, has ensured the primacy of the dollar.” Bitcoin and, by extension, El Salvador are not yet a direct threat to this. “But the keyword there is ‘yet.’ Other nations may have their heads turned by Bitcoin and El Salvador as a consequence.”

Others were unsurprised that the IMF was asking the country to scrap its legal tender experiment. “It does not surprise me that the IMF is making this request of El Salvador for multiple reasons,” David Tawil, president and co-founder of ProChain Capital, told Cointelegraph. 

As the world’s lender of last resort to sovereign nations, the IMF is looking to have fewer, not more, borrowers, said Tawil. Then, too, El Salvador doesn’t have a particularly sterling record with the IMF and capital markets generally. But there might be something more self-serving behind it, too, he suggested, adding: 

“It is possible that if Bitcoin becomes a strong worldwide reserve currency, the IMF may be deemed a lot less effective and necessary.”

Moreover, the risks listed in the fund’s Jan. 25 statement, including financial stability, do “not seem to be a compelling enough reason, given there is very little evidence of the widespread use of Bitcoin for day-to-day transactions in El Salvador,” Syed Rahman, a partner at law firm Rahman Ravelli, told Cointelegraph.

What spurred the fund to action then? “The IMF is clearly reacting to the recent volatility within the markets,” said Rahman. Given the price retrenchment and apparent drop in investor demand for BTC, “it’s not clear whether the current structure is attracting a recurrent source of liquidity” in the IMF’s mind. 

Pioneer or renegade

But maybe the IMF knows whereof it speaks. What if Salvadoran President Nayib Bukele is more stumbler than seer, and his nation’s grand experiment is just a giant bungle?

“El Salvador’s experiment hasn’t gone very well,” acknowledged Tawil. Technical problems have emerged, and Bitcoin’s recent market price drop hasn’t helped. “El Salvador is not a poster child for a strong and thriving economy. So, it was never likely that there was going to be a long line of followers behind El Salvador.”

“I don’t see any evidence that the Bitcoin adoption has been a success,” John Hawkins, senior lecturer at Canberra School of Politics, Economics and Society, University of Canberra, told Cointelegraph, “so I think it’s unlikely that many, if any, countries will follow.” 

One possible exception could be countries where hyperinflation has led to a loss of confidence in the national currency such as Venezuela, Hawkins added, “but even there, dollarization or a currency board would be a better option” than adopting Bitcoin. 

Nor has there been any surge in foreign investment in El Salvador since September when BTC became legal tender, continued Hawkins. “President Bukele promised it would add 25% to El Salvador’s GDP.” That hasn’t happened. 

An 84% adoption rate?

On the other hand, an Ark Investment Management report issued in late January recounted that crypto adoption had soared in the country. “An estimated 3.8 million people use El Salvador’s Bitcoin wallet, Chivo, suggesting 84% adoption among eligible citizens.” More people now have Bitcoin wallets than traditional bank accounts (1.9 million), the report noted.

Hawkins wasn’t impressed. Salvadorans who followed President Bukele’s advice about holding Bitcoin instead of dollars would have lost a significant proportion of their savings, he told Cointelegraph, adding:

“It’s unsurprising that a lot of people wanted a Chivo wallet, as it came with a free $30. News stories suggest many people just withdrew the $30 and have not used the wallet since.” 

Ark Investment also noted that Chivo was settling $2 million in remittances daily as of October 2021, “accounting for roughly 12% of El Salvador’s $6 billion in annual remittances and more than 2% of its GDP.” The nation’s Bitcoin play has given its citizens unprecedented financial opportunities, said Ark CEO Cathie Wood.

“El Salvador will hopefully continue with its experiment,” Tawil told Cointelegraph, predicting that it would “achieve slow but important success. And, the price of Bitcoin will rise again.” Indeed, in the long term: 

“El Salvador may be the most important first mover for the sector.”

Still, isn’t there a price to pay if El Salvador continues to flout IMF directives? “It does matter what the IMF says,” Hawkins said. “Even if you do not respect their expertise, El Salvador has been looking for a loan from them.” Dissing the fund and taking actions that the multilateral bank regards as risky just make it harder for El Salvador to get that loan.

A hidden agenda?

What about this notion that the IMF has ulterior motives and that it is simply hostile to cryptocurrencies because they threaten the U.S. dollar and/or the incumbent global banking system?

“I absolutely agree,” said Tawil. “I think that the IMF is a self-serving agency and is likely as corrupt as other worldwide governing bodies, such as the International Olympic Committee.”

Hawkins differed. “I don’t think the IMF is motivated by protecting banks. They are concerned about the welfare of people in El Salvador and also want El Salvador to be able to repay loans from the IMF.”

The IMF has been taking a “rather aggressive approach” to cryptocurrency-related products, commented Rahman, but current volatility is affecting all markets, not just cryptocurrencies. “It is also worth noting that El Salvador’s relations with the United States have deteriorated, and it could be inferred this is a contributing factor.”

What about the timing of the IMF’s message, why now? The fund has been critical of the El Salvador BTC experiment from the beginning, said Tawil, but “the current pullback in the price of Bitcoin allows the IMF to scream ‘I told you so’ and have additional force behind its opinion.” 

Bukele was notably purchasing more BTC during the most recent crypto drawdown. “Most people go in when the price is up,” he tweeted on Jan. 24, “but the safest and most profitable moment to buy is when the price is down. It’s not rocket science.” 

Reading the future

The IMF’s demands to El Salvador on Bitcoin “shows the institution to be on the wrong side of history,” declared deVere CEO Nigel Green in an emailed press release. “The IMF [is] asking a pioneering sovereign nation to drop a future-focused financial policy that attempts to bring it out of financial instability and a reliance on another country’s currency.”

One shouldn’t forget, either, that the IMF is headquartered in Washington, D.C., that the U.S. is a founding member, and the U.S. is also the largest contributor to the international institution, which has 190 member countries. “The fortunes and interests of the IMF and the U.S. are, therefore, arguably inextricably linked,” Brown told Cointelegraph.