El Salvador Adopting Bitcoin Is "An Inadvisable Shortcut": International Monetary Fund
The International Monetary Fund (IMF) heavily criticized El Salvador's decision to adopt Bitcoin (CRYPTO: BTC) as a legal tender.
What Happened: Alongside a blog post published on Sunday, the IMF tweeted that the risk of "privately issued crypto assets like Bitcoin" makes it so that "making them equivalent to a national currency is an inadvisable shortcut."
In its blog post, the IMF admits that digital assets "have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers."
Still, the institution points out that creating the "requires significant investment as well as difficult policy choices."
Why It Matters: For this reason, the IMF considers adopting Bitcoin to be a shortcut on El Salvador's part: it adopted a preexistent system instead of creating a custom-made one.
The institution admits that many cryptos are secure, easy to access, and cheap to transact but claims that "in most cases risks and costs outweigh potential benefits."
For instance, the post claims that crypto's "value is just too volatile and unrelated to the real economy."
The IMF also warned that the widespread adoption of a crypto asset such as Bitcoin could hurt macroeconomic stability.
The regulator claims that "if goods and services were priced in both a real currency and a crypto asset, households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities."
What Else: Furthermore, adopting crypto exposes exchange rate risk if taxes were quoted in advance in it, while expenditures remained mostly priced in fiat currency or the reverse.
Lastly, the IMF raises concern that Bitcoin mining consumes "an enormous amount of electricity" and consequently, "the ecological implications of adopting these crypto assets as a national currency could be dire."
Price Action: The leading cryptocurrency was trading at $47,599, down 3.37% over the last 24 hours and down 4.09% over the past week.
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