The International Monetary Fund tells El Salvador it shouldn’t use Bitcoin as legal tender

Illustration by Alex Castro / The Verge

The International Monetary Fund's executive board has recommended that El Salvador stop using Bitcoins as a legal tender. The country's use of the digital currency could make it hard for it to get a loan from the International Monetary Fund.

The recommendation comes as part of the organization's consultation, where staff members visit a country and prepare a report that is discussed by the executive board. The board summary looked at and discussed El Salvadoran's economic policies as a whole, but the country's adoption of Bitcoin as a legal tender got a lot of attention.

The board of the International Monetary Fund agrees with the staff's recommendation that the country change its law because of the large risks associated with the use of Bitcoins. It did commend one of the government's stated goals of using Bitcoin and its Chivo wallet and ATMs to make financial services available to more Salvadorans.

In June of the same year, El Salvadoran passed a law allowing the use of virtual currency as a legal tender. In addition to establishing Bitcoin as a legal tender alongside the US dollar, the law also means that citizens can pay their taxes in Bitcoins and that shopkeepers can display prices in the virtual currency. The law in El Salvadoran should be narrowed so that it is no longer a legal tender.

The president of El Salvadoran is a strong supporter of the digital currency and frequently uses his social media accounts to promote it. According to calculations based on public statements, the country has over 1,500 Bitcoins. The president wants to create a $1 billion Bitcoin bond that investors can buy a stake in.

Investing.com later corrected the post, saying that Moody's hadn't recently lowered El Salvador's rating.