Cryptocurrencies have been gaining immense popularity. Earlier this year, the Central American country, El Salvador became the first to declare the leading cryptocurrency, Bitcoin, as a legal tender. It means Bitcoin as a legal currency is now officially recognized in El Salvador.
While El Salvador’s move has been largely welcomed by the crypto community globally, the International Monetary Fund (IMF) has issued warnings citing security risks with making Bitcoin a legal tender. In a dedicated post, earlier this week, IMF’s financial counsellor, Tobias Adrian, said that making Bitcoin a legal tender will harm the country’s economic stability. He said it will also put consumers at risk.
Expressing concerns, the IMF counsellor wrote: “Cryptoassets can be used to launder ill-gotten money, fund terrorism, and evade taxes. This could pose risks to a country’s financial system, fiscal balance, and relationships with foreign countries and correspondent banks.”
In his post, he also said that cryptocurrency cannot be a solution to combat inflation. A better solution would be to accept leading currencies like the Dollar or Euro, he suggested. The post also raised concerns about the environmental impact of Bitcoin mining.
However, despite criticizing El Salvador’s move to make Bitcoin a legal tender, the IMF counsellor also agreed that cryptocurrencies have the potential to provide a faster transaction processing alternative and help the unbanked population.