The International Monetary Fund warned on Monday that El Salvadoran is not allowed to use bitcoin as an official tender due to the risks associated with the currency, as it has previously used the US dollar for two decades, became the first country in September to legalize it as a legal tender.
The use ofBitcoin as a legal tender involves significant risks to consumer protection, financial integrity and financial stability, according to the International Monetary Fund in a statement after it concluded a monitoring mission to the small Central American country.
Its use gives rise to fiscal contingent liabilities. Because of the risks,Bitcoin should not be used as a legal tender. The Washington-based lender recommended narrowing the scope of the law that made it an official currency and strengthening the regulation and supervision of the new payment ecosystem. President Nayib Bukele said on Friday that El Salvador plans to build a Bitcoin City powered by a volcano and financed by cryptocurrencies bonds.