International Monetary Fund spokesman Jerry Rice said on Thursday that the adoption of bitcoin in El Salvador as a legal tender may involve a number of risks and regulatory challenges.
“Bitcoin’s adoption as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis, so we are monitoring developments closely and will continue our consultations with the authorities,” Rice said, speaking in Washington. “Crypto assets can pose significant risks and effective regulatory measures are very important when it comes to them.”
Rice said an IMF team is holding virtual meetings with El Salvador on the country’s review of its Article IV and potential credit program “which includes policies to strengthen economic governance.” The team will meet Bukele on Thursday.
The El Salvador Congress passed a law this week that requires companies to accept bitcoin in exchange for goods and services. President Nep Bukele said the digital currency will help counteract low bank penetration in El Salvador and reduce the cost of sending remittances.
The country’s bonds slid, causing the yield on its 2025 bonds to rise 71 basis points to 7.8 percent as of 10:40 a.m. in New York. El Salvador’s bonds are the worst performing in emerging markets this week, according to the Bloomberg Barclays Index.
“Bitcoin’s plans in an increasingly authoritarian regime are likely to exacerbate concerns about corruption, money laundering, and the independence of regulators,” Sioban Morden, director of Latin America fixed income strategy, wrote in a note in Amherst Pierpont.