IMF Warns El Salvador to Consider Risks of Bitcoin as Legal Tender

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The International Monetary Fund (IMF) has recommended that El Salvador stop using Bitcoin as legal tender, pointing to financial and consumer risks associated with the cryptocurrency, soon after the country’s President Nayib Bukele announced plans for the world’s first Bitcoin city, powered by a volcano and financed by cryptocurrency bonds. El Salvador, a country that has used the US dollar as its primary fiat for over two decades, legalised Bitcoin as an official tender in September, and has been able to reap profits out of the move too.

In a statement, the IMF acknowledged that Bitcoin, and cryptocurrencies in general, can facilitate efficient payments, but allowing them as legal tender will likely pose problems for financial stability. “Given Bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability. Its use also gives rise to fiscal contingent liabilities. Because of those risks, bitcoin should not be used as a legal tender. Staff recommends narrowing the scope of the bitcoin law and urges strengthening the regulation and supervision of the new payment ecosystem,” stated the IMF in a statement.

The global agency also called on El Salvador to narrow the scope of its Bitcoin law and strengthen the regulation and supervision of the new payment ecosystem.

El Salvador plans to build the world’s first “Bitcoin City”, funded initially by Bitcoin-backed bonds, President Nayib Bukele said over the weekend, doubling down on his bet to harness the cryptocurrency to fuel investment in the Central American country.

Speaking at an event closing a week-long promotion of Bitcoin in El Salvador, Bukele said the city planned in the eastern region of La Union would get geothermal power from a volcano and not levy any taxes except for value-added tax (VAT).

The IMF regularly undertakes Article IV missions to member countries to consult with government officials before they request to use IMF resources. “The plans to issue sovereign bonds and use the proceeds to buy Bitcoin and fund infrastructure plans announced on November 20, occurred after the technical work of the mission concluded, and were not discussed with the authorities,” the IMF clarified.

This isn’t the first time the IMF has warned the Latin American country for being Bitcoin-forward. Earlier this year, when El Salvador had just passed its historic Bitcoin Law, the IMF had a predictable reaction of opposing its prospects. Yet, despite its multiple warnings against the risks of a Bitcoin-legalised financial system, El Salvador had powered through with its plan. The country has launched its Bitcoin-powered Chivo Wallet app as well as established multiple ATMs to facilitate daily transactions and remittance transfer in Bitcoin.


Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.
Gap Launches Its First NFT Collection on Tezos Blockchain

Gap Launches Its First NFT Collection on Tezos Blockchain

Gap, the global clothing brand, is making its first foray into the world of non-fungible tokens (NFTs) through a collaboration with New York-based artist Brandon Sines and open-source blockchain platform Tezos. Sines, the brains behind the cartoon Frank Ape, helped draw up the collection based on Gap’s signature hoodie. The digital collectibles come in four tiers based on pricing and availability: common, rare, epic, and one-of-a-kind. Buyers of the epic-level NFTs will also receive an exclusive physical Gap x Frank Ape hoodie while common, rare NFT buyers get a way to “unlock” the ability to purchase an epic NFT.

Gap’s common rarity NFTs will be available starting January 13 for two of Tezos’ native XTZ coin which is valued just under $9 or roughly Rs. 665, with rare-level NFTs going on sale on January 15 for XTZ 6 ($26 or roughly Rs. 1,922). Epic-level NFTs will follow on January 19 for XTZ 100 ($436 or roughly Rs. 32,234), while the single-edition ‘One of a Kind’ NFT will be auctioned off starting January 24.

Buyers of epic-level NFT will also receive an exclusive physical Gap x Frank Ape hoodie, and Gap Threads will have a gamification model which lets collectors of the common and rare NFTs “unlock” the ability to purchase an Epic rarity NFT.

The way this will work is customers will need to complete a collection of four common and two rare NFTs in order to create a “commemorative NFT,” which then “unlocks access to purchase a limited edition Epic NFT,” according to an announcement by Gap. Customers who purchase an epic NFT will be able to claim the physical hoodie co-designed by Brandon Sines, claims the announcement.

While this is Gap’s first push into the NFT space, it might not be the last. In a release, the company wrote that it “plans to learn more about how their customers want to engage in a digitally-led world.” The global clothes retailer currently has a creative partnership with Kanye West in place too which just aired its first TV advertisement.

Gap also chose to partner with Tezos due to the platform’s emphasis on a low carbon footprint. Crypto formats like NFTs have recently spurred outcry for producing high emissions, meaning Gap could safeguard itself from backlash by focussing on energy efficiency.


Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

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