The International Monetary Fund prompts El-Salvador to Withdraw Bitcoin’s Status as a Legal Tender.

The (IMF) International Monetary Fund board’s directors have now prompted the El Salvador government on reversing its Bitcoin law authorities to reverse its decision on the Bitcoin law by removing Crypto Space legal tender status”

El Salvador came to be the first nation to allow its citizens to use digital assets in all transactions together with the US dollar. This signifies that businesses will be mandated when possible to receive Bitcoin as payment for goods and services.

However, this decision to legalize Bitcoin in El Salvador has drawn global attention and led to large-scale protests. El Salvador’s action saw thousands of citizens carrying sign cards reading ” No to Bitcoin’. The protesters also destroyed one of the Bitcoin Atm installed in the country as the protesters feared that it could cause inflation. 

Many of these protesters also believe that Bitcoin will bring about instability in the country. They fear that the economy and the democracy of the country are being threatened. 

The President of El Salvador Nayib Bukele was warned by the IMF about the risks that cryptocurrency poses to the country. The IMF also reiterated that with Bitcoin made legal tender in El Salvador, it will be difficult for the institution to grant the nation any loan.  

However, this didn’t seem to make Nayib Bukele change his stance since he had declared in November this plans to build the world’s first “Bitcoin City,”.  He claimed the city will be powered by a volcano and financed by $1 billion cryptocurrency bonds. He also said his administration will also harness the advantage of buying digital assets for the country when the price of Bitcoin drops.

Some of The Fears about bitcoin’s status as a Legal Tender.

1 . Bitcoin Fluctuation

The worth of Bitcoin has fallen and risen dramatically in the last year. In September of 2020, the coin surged from its $10,000 price range to an all-time high of $63,000 which was attained in April of 2021. After that, the digital coin fell by almost 50% dipping to a price range of $30,000  just after some months. This is one of many things that get people worried.

2. Crypto uncertainty.

Many people are skeptical about the adoption of Bitcoin as a Legal Tender as a great number of citizens don’t fully or rarely understand the cryptocurrency project itself. 

3. Consumer Protection.

There are fears of whether citizens will be able to keep their Bitcoin safe at the sales or working hours.

4. High Domestic prices.

The risks of having unstable domestic prices, raising the macroeconomic and financial integrity.

The Salvador Forty-year-old President Nayib Bukele has attached his political fate to the success of the country’s bitcoin experiment. He also recently added hundreds of bitcoin to the country’s balance sheet. 

El Salvador’s nationwide adoption of bitcoin also featured the creation of a national crypto wallet known as Chivo. The wallet allows for a quick cross-border payment that requires no-fee transactions. Chivo is designed to provide an easy way for individuals who have never participated in the banking system. The wallet also looks to create local financial services for a country where 70% of the citizens do not have access.

The IMF directors also acknowledged that the Chivo e-wallet would promote virtual forms of payment. This will help improve financial inclusion despite the demand for stringent oversight and regulation. However, many citizens of El- Salvador have reported situations of identity theft, claiming hackers are able to have access to their personal info via their national ID number. The citizens had to use their National ID to claim the free Bitcoin value of $30 provided by the government to those who open a crypto wallet.

In addition to all this, the government claims that the bitcoin gains will allure investors to stake on the 6.5% interest rate earned on a dollar yield. This is significantly higher than what the market presently offers within the country. The country is also preparing the allocation of $1 billion in bonds, half of which would be used to purchase bitcoin. 

The international monetary fund warned that at the present level of El Salvador’s debt spending, the country’s debt could surge by 96% before 2026. The institution is calling it a destructive path. Furthermore, Analysts envisioned that bitcoin will encounter increased competition from equivalent digital assets like either.