International Monetary Fund’s (IMF) managing director Kristalina Georgieva says El Salvador’s move to adopt Bitcoin as a legal tender will introduce significant risks to the Central American country.
Georgieva says that El Salvador’s adoption of Bitcoin as a currency will bring uncertainty to financial planning at the household, enterprise and national levels, among other risks.
“Let me start by saying it is a sovereign decision. Being a sovereign decision doesn’t automatically make it a very good decision because what it introduces in El Salvador is a highly volatile asset to serve as a currency. And the risks it brings are for the naked eye to see.
One, how do we know what we collect in taxes when Bitcoin goes up and Bitcoin goes down? How do we plan for expenditures? Remember in April, Bitcoin crossed $65,000, and then it dropped almost half of it. That is a problem that the Ministry of Finance is going to be wrestling with. It is not an easy one.
Secondly, how do people plan – individual consumers or the vendors that have to sell goods and services in that volatile asset?
And the third one is – those who know me know I care very deeply about the environment. One of the issues with Bitcoin is mining Bitcoin is very energy intensive.”
Georgieva also says that it’s difficult to make a means of payment out of an asset.
“[It’s] hard to make an asset to be a means of payment. And what we care about is efficient, effective, reliable payment systems.”
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