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IMF says Bitcoin adoption in Central African Republic poses risks

Nearly 400,000 traders lost $1.2 billion after Bitcoin dropped below $27,000
TL;DR Breakdown
  • CAR’s Bitcoin adoption can pose financial risks according to IMF
  • The move to adopt bitcoin has reportedly been slammed by the regional central bank

The International Monetary Fund (IMF) highlighted the difficulties that adopting Bitcoin as a legal currency for the Central African Republic presents for both the nation and region. The government announced last that one of the world’s poorest nations would become the second to adopt bitcoin after El Salvador.

The move was lambasted by opposition parties, who said it was made without consulting the regional central bank, which administers a shared currency used by six nations, including the Central African Republic.

The International Monetary Fund weighed in on the Central African Republic’s decision to embrace bitcoin, with critics including banks and organizations. The IMF claims that the use of bitcoin poses significant legal and economic issues not just for the country but also for the entire region.

The IMF has stated that CAR’s recent decision to embrace bitcoin has posed several problems for the country and the region. The comments from the global lender have sparked a heated debate over CAR’s choice to make bitcoin legal currency for the first time.

Following an announcement issued by the IMF, News reported that the IMF was and is still critical of a similar move made by El Salvador in 2021. The worldwide lender has previously stated that bitcoin adoption might cause many macroeconomic, financial, and legal problems. In January 2022, the IMF urged El Salvador to repeal its bitcoin legislation but was rejected by the latter.

Low internet penetration rate of CAR is evident

However, while government officials in the African country have claimed that adopting bitcoin as a legal currency would aid the economy to grow, others disagree. They also note that the CAR’s low internet penetration rates and economic status are problems.

Meanwhile, the Bloomberg story claims that the CAR’s decision to embrace bitcoin was made hastily and without input from stakeholders. According to reports, the regional central bank has condemned the choice to utilize bitcoin.

El Salvador says no to IMF on Bitcoin

The El Salvadoran government has turned down an IMF suggestion to eliminate bitcoin as legal money in the country.

The IMF recommended El Salvador eliminate bitcoin’s legal tender status and dissolve Fidebitcoin, a $150 million trust fund established for the purpose of implementing the Bitcoin law.

Countries are autonomous nation-states, and they make sovereign governance decisions in their own interests.

Alejandro Zelaya, El Salvador’s Minister of Finance

In its recent study on El Salvador, the IMF claimed that “actual expenses of implementing Chivo and operationalizing the Bitcoin legislation exceed potential benefits in the near term.”

The International Monetary Fund (IMF) also called for El Salvador’s government to institute a charge for its digital wallet, Chivo. Furthermore, the IMF urged the Salvadoran authorities to stop rewarding $30 in bitcoin to anyone who signs up to use Chivo.

John Lincoln

John Lincoln

Lincoln contributes blockchain and crypto perspectives that meet the industry's selective information needs in a timely, undiluted fashion. His greatest wish is to share transformational technology through an engaging and easy-to-read style, making complex topics accessible to all.

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