Erik Weijers, a year ago

IMF to El Salvador: stop accepting Bitcoin as legal tender

The IMF has urged the government of El Salvador to roll back the law of Bitcoin as legal tender. That law has been in effect since September 2021. The President of El Salvador Nayib Bukele, responded with a friendly raised middle finger, by means of a meme.

The IMF stated, "The adoption of a cryptocurrency as legal tender, however, entails large risks for financial and market integrity, financial stability, and consumer protection." This statement followed talks between the IMF and El Salvador.

El Salvador is a country that depends on loans from the IMF and is still negotiating future loans. For this reason, the country cannot be insensitive to pressure from the IMF. On the other hand, President Bukele has already made the radical decision to move away from a monetary system that, in his view, has done El Salvador little good. He wants to get rid of the debt-based system and switch to a Bitcoin standard.

Volcano Bonds

One of the ways Bukele wants to achieve this is to mine Bitcoin on a national scale. The geothermal energy of volcanoes is the source of this mining and therefore the underlying value of the so-called "volcano bonds" that El Salvador will issue. The issuance of the first round should raise over $1 billion. One of the potential future customers of the Bitcoin Bonds, by the way, is MicroStrategy, which already has over 120,000 Bitcoin on its books. "If the market for these bonds becomes more liquid," was a condition recently set by the company's CFO.

Samson Mow, Blockstream's CSO, is one of the architects of the Bitcoin bonds. He was asked if prospective investors in El Salvador's Bitcoin bond are getting nervous about the IMF's warning. 'No. In a Bitcoin-based world, organisations like the IMF and the World Bank are no longer really relevant. They are only relevant because they can create money out of thin air. You can't do that on the Bitcoin standard. [...] That's how money is meant to be. Not a surveillance mechanism or a tool to impose your economic policies on another nation.”

Another nation adopting Bitcoin?

The IMF's response comes at a time when Max Keiser, the "High Priest of Bitcoin," says he has received confirmation that another South American country will follow in El Salvador's footsteps and adopt Bitcoin.

Could the IMF be worried that too many of its 'customers' are switching to 'the competition'?

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