IMF Reiterates Call for El Salvador to Reform Bitcoin Policies and Strengthen Regulatory Controls

IMF Reiterates Call for El Salvador to Reform Bitcoin Policies and Strengthen Regulatory Controls

The International Monetary Fund (IMF) has once again urged El Salvador to revise its Bitcoin policies and strengthen its cryptocurrency regulatory framework. During an October 3 press conference, Julie Kozack, Director of the IMF's Communications Department, highlighted that IMF staff are closely working with Salvadorian officials to finalize a new IMF-supported program aimed at stabilizing the economy and promoting growth-focused reforms.

Central to these discussions is the IMF’s recommendation to address the risks associated with Bitcoin. Kozack emphasized the need for El Salvador to narrow the scope of its Bitcoin law, bolster its regulatory framework, and enhance oversight of the Bitcoin ecosystem. Additionally, the IMF recommends limiting the public sector's exposure to Bitcoin to safeguard economic stability.

Kozack praised the country's 2025 budget proposal, describing it as a step in the right direction for strengthening public finances, but underscored the necessity of strong implementation to achieve fiscal sustainability.

The IMF has previously expressed concerns over El Salvador’s decision to adopt Bitcoin as legal tender in September 2021. The organization had warned of potential financial instability, citing Bitcoin’s volatility and the lack of consumer protections in crypto transactions. These concerns, it suggested, could complicate future financial aid from the IMF. By August 2024, while some of the major risks had not materialized, the IMF still advised El Salvador to enhance transparency and improve risk management related to its Bitcoin initiatives.

The IMF’s continued emphasis on refining Bitcoin policies reflects a broader effort to help El Salvador avoid potential fiscal and financial instability while ensuring a more robust regulatory framework for its cryptocurrency activities.