The International Monetary Fund (IMF) has warned El Salvador to proceed with caution when it comes to increasing the government’s involvement with Bitcoin (BTC) due to the speculative nature of cryptocurrency markets.

According to a recent statement from the IMF, El Salvador’s current limited use of Bitcoin has prevented its potential risks from materializing, but the country should still be aware of the impact that Bitcoin could have on fiscal sustainability, consumer protection, financial stability, and integrity. 

The IMF also advised against the issuance of tokenized bonds as they carry significant legal and financial risks. Given that Bitcoin has been recognized as legal tender in El Salvador since September 2021, the IMF acknowledged that its use in the country could increase in the future.

In statement, it is mentioned that:

“Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to Bitcoin, including by issuing tokenized bonds.“

Source: https://www.imf.org/en/News/Articles/2023/02/10/el-salvador-staff-concluding-statement-of-the-2023-article-iv-mission

The IMF has also stressed the importance of greater transparency from the Salvadoran government regarding both its Bitcoin transactions and the financial standing of its state-owned Bitcoin wallet, the Chivo wallet.

This call for transparency follows the recent establishment of a legal framework for a Bitcoin-backed bond in El Salvador, known as the “Volcano bond,” on January 11th.

The Salvadoran government has stated that the bonds will be used to repay sovereign debt and finance the development of its proposed “Bitcoin City.” This is part of El Salvador’s efforts to continue attracting cryptocurrency investors, and the country has indicated that addressing any potential criminal activity related to cryptocurrencies will be a priority in 2023.

Guillermo Contreras, CEO of DitoBanx, has previously said that the opening of the National Bitcoin Office in El Salvador will serve as a central entity to address these issues.

Bitcoin Experiences Wider Adoption In Nigeria As Protests Against CBDC Surge

Nigeria is making a strong push to enforce the use of its own CBDC, but more and more people are preferring Bitcoin as an alternative. 

Nigeria is one of the few countries that have already introduced its own digital central bank currency. The cashless Nigeria monetary policy aims to gradually limit the use of cash and promote the usage of the country’s own central bank digital currency (CBDC), known as the eNaira. As part of this strategy, the Central Bank of Nigeria (CBN) announced in October last year to reissue certain banknotes. Old notes will then no longer be accepted as legal tender.