IMF Urges El Salvador to Enhance Bitcoin Transparency Amid Ongoing Discussions

By Eproint

An International Monetary Fund (IMF) mission issued a statement following in person and virtual discussions over the past months with the Salvadoran authorities. These discussions focused on policies that could be supported by an IMF program to address macroeconomic measures and strengthen El Salvador’s medium-term growth prospects and resilience.

According to the IMF, on Bitcoin, while many of the risks have not yet materialized, there is joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the Bitcoin project. "Additional discussions in this and other key areas remain necessary," the statement says. 

In June 2021, El Salvador became the first country to adopt Bitcoin as a legal tender. The law establishes the exchange rate between bitcoin and the U.S. dollar. Other characteristics of the law include: prices may be expressed in bitcoin; tax contributions can be paid in bitcoin; exchanges in bitcoin will not be subject to capital gains tax; all economic agents must accept bitcoin as payment when offered; the government should provide alternatives that allow the user to carry out transactions in bitcoin, will promote necessary training and mechanisms so that the population can access bitcoin transactions. 

On the structural side, preliminary understandings were reached between the IMF and El Salvador on a comprehensive multi-year strategy to enhance governance, transparency, and the overall investment climat. This work is being supported by development partners and aims to ensure frameworks are consistent with international best practices.