El Salvador made IMF grind its teeth ever since it announced its support for Bitcoin.
A small Central American state who dared to challenge the all-mighty dollar has been attacked on many occasions since it acknowledged Bitcoin as legal tender last September.
⚠️ Important note: Bitcoin is not the only legal tender in El Salvador, it is an alternative to the American dollar, which keeps its status of money, so that Salvadorans are free to choose between the two currencies.
And still, IMF is not happy. It has issued a number of “warnings”, pointing at price volatility and, unsurprisingly, AML and environment issues (the last one particularly inappropriate in a country that uses volcano energy to mine crypto and even intends to build a whole volcano-powered city financed by Bitcoin-backed bonds).
This week IMF conducted a consultation with El Salvador and once again “urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status”.
It did not mention environment and could not deny the importance of Chivo wallet for financial inclusion. It also noted that after the economy shrank -7.9% in 2020, it has grown +10% in 2021.
? However, IMF board still concluded that “there are large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities”.
? Why is IMF anti-crypto?
One reason IMF is so hostile can be that its executives think that adult and legally competent Salvadorans cannot be trusted with managing their own money and would somehow use Bitcoin to avoid paying taxes. The first assumption is offensive, and the second one is wrong: Bitcoin is perfectly traceable.
There can be another reason : El Salvador created a dangerous precedent that could potentially challenge the dollar’s dominance of the world’s finance ?
? What is IMF?
IMF may have “international” in its name and “foster global monetary cooperation and promote sustainable economic growth” in its mission, we all know where it came from.
IMF was created in 1944 to address any potential disequilibrium within the (fixed) gold/dollar exchange rates, when most Bretton-Woods signatory countries sold their gold to the US, which promised them they could redeem it against dollar whenever they wanted. This promise was notoriously broken by President Nixon in 1971, all while IMF did absolutely nothing.
The organisation has rebranded itself since, but it is still based in Washington D.C. and the US is still the most powerful board member, with 16.5% of the votes.
It is highly political, and we don’t really want to dive into its intricacies… but reasonable questions as to IMF’s true intentions stay ?