IMF Criticizes El Salvador Bitcoin Policy while India FUD Returns – Regulations Weekly
IMF Issues Statement on El Salvador
It has been no secret that since the day El Salvador announced its intent to make Bitcoin legal tender, the International Monetary Fund (IMF) was against the idea. This sentiment has once again reared its head in a recently released statement by the IMF, indicating its belief that immediate and dramatic changes are needed surrounding this newly implemented policy.
“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.”
This stance, which was strengthened after recent discussions with the government itself, does not take in to account the recent decision to issue bitcoin-backed government bonds – something the IMF will most surely take issue with. For the time being, the IMF indicates that it will perform a ‘careful analysis’ surrounding this decision and any associated implications.
India FUD Returns
Markets in India were rocked this week, as a recycled bill which was first introduced in January of 2021 was once again put forth. The bill, which would see a ban on private cryptocurrencies resulted in significant FUD within India at the time. While it was temporarily tabled, its reintroduction has once again led to noteworthy market corrections in India.
Although this bill is being touted as a means of protecting investors, many have argued that it will do the exact opposite. With India touting some of the world’s highest crypto ownership among its populace, the amount of citizens that would be crippled by such a move are significant.
If looking for further evidence of FUD running rampant, simply look towards recent performance of Tether. While the popular stablecoin has maintained its pegging to the US Dollar in much of the world, services based in India have seen the asset drop to as little as 80 cents as traders scramble to re-position their holdings.
While India, El Salvador, and others continue to grapple with regulations, the U.S. made a noteworthy appointment at its Federal Reserve, with Jerome Powell being nominated as Chairman.
Chairman Powell recently caught the attention of those following digital assets, as he stated that the Federal Reserve had no intent on banning Bitcoin – a clear stance, and stark difference from approaches being taken in nations like India.
In his acceptance speech, Chairman Powell notably referenced payment systems as a key priority moving forward. He states that, “…key priorities include vigilantly guarding the resilience and stability of the financial system, addressing evolving risks from climate change and cyber attacks, and facilitating the modernization of the payments system while protecting consumers.”
No doubt this ‘modernization’ includes the development of both a CBDC and treatment of digital assets like Bitcoin.