In a recent report, the IMF praised the way El Salvador dealt with the COVID-19 situation and announced that its economy grew by 10% in 2021. The International Monetary Fund also recognizes the efforts of the El Salvador government to reduce crime, “diversify the energy matrix, promote” economic diversification and improve financial inclusion. “When it comes to Bitcoin, however, the IMF is completely against it. As they should. Because Bitcoin makes the IMF irrelevant.
But first, let’s learn what the report, entitled “El Salvador: Final Declaration by the Staff of Article IV Mission 2021″, is about:
“A final statement describes the preliminary results from IMF staff at the end of an official staff visit (or ‘mission’), in most cases in a member country. Missions are carried out as part of regular (usually annual) consultations in accordance with Article IV of the IMF Agreement. ”
Anyway, let’s go to the IMF’s crazy opinions about Bitcoin.
BTC price chart for 11/23/2021 on Oanda | Source: BTC/USD on TradingView.com
What does the IMF think of Bitcoin as legal tender?
After praising El Salvador’s efforts to promote “financial inclusion and growth”, the IMF is attacking the very tool the country’s government is using to achieve this.
“Given Bitcoin’s price volatility, its use as legal tender bears significant risks to consumer protection, financial integrity and financial stability. The use also gives rise to contingent tax liabilities. Because of these risks, Bitcoin should not be used as legal tender. The staff recommends limiting the scope of the Bitcoin Act and urges that regulation and supervision of the new payment ecosystem be strengthened. ”
Translation: The IMF can’t even think of a good reason why Bitcoin is not legal tender. A bitcoin is a bitcoin. Cryptocurrency volatility is closely related to the assets we compare it to. In this case the US dollar. It is also important to remember that Bitcoin is legal tender in El Salvador, BESIDE the US dollar. If people don’t want volatility, they can easily convert all of their money into the other currency, which is legal tender.
The IMF also conveniently ignores the fact that Bitcoin’s volatility can produce positive results for its users. And that their other option, the US dollar, is going through a period of inflation like no other. And when the US government prints more money, its citizens benefit. But El Salvador doesn’t. A dollarized country that does not have control over the money printer loses its purchasing power due to relentless inflation, but does not get the airdrops and the inorganic money that artificially stimulates the economy.
Does the IMF have any other advice?
Of course they do. First, they praise El Salvador’s efforts to achieve financial inclusion. Then the IMF recommends taking exactly the same measures that keep 70% of their population away from the financial system.
“Stricter regulation and supervision of the new payment ecosystem should be implemented immediately for consumer protection, the fight against money laundering and the fight against terrorist financing (AML / CFT) as well as risk management.”
Why do the people of El Salvador not have a bank account? Do you think it’s voluntary? Isn’t the IMF aware that its outdated and inefficient methods are causing the bottleneck? Bad actors have incentives to bypass AML and KYC procedures. You do it with ease. Ordinary people cannot create all of these documents. And for banks, the cost of processing all this data makes acquiring a new customer expensive. There are no incentives to serve the low-income population.
“Recently announced plans to use the proceeds of new government bond issues to invest in Bitcoin, and the impact of trading Bitcoin in general, require very careful analysis of the implications and potential risks to financial stability.”
Translation: What does this have to do with a Bitcoin City? !!!!! And they are building a veterinary clinic ?! ALARM! ALARM!
US interrupts relations with El Salvador
In mid-range news, Reuters said that US chief executive Jean Manes said on local television that relations between the two countries were on hold. “Of course we’re taking a little break because the El Salvador government is not giving a signal that it is interested in our relationship,” she said. “On behalf of the White House, the State Department, we offered a bridge and the (Salvadoran) government has decided not to accept it. As far as we are concerned, we are interested in having the best relations with El Salvador. ”
Sure, Manes. That sounds totally believable. There’s nothing suspicious here.
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