IMF warns El Salvador: “Bitcoin should not be used as a legal tender”

https://www.imf.org/en/News/Articles/2021/11/22/mcs-el-salvador-staff-concluding-statement-of-the-2021-article-iv-mission

by giuliomagnifico • 5 years ago

77 64 5 years ago

imf.org

smoldesu2• 5 years ago

I'll trust a press release from The Muppets before I take a recommendation from the IMF seriously.

jascii• 5 years ago

The Muppets don't have a big stick to wield in the form of advising their member states to withhold aid, commerce, etc...

xiphias2• 5 years ago

IMF already did that to El Salvador, they just weren't expecting the president to respond with a countermove.

zingplex• 5 years ago

While I don't disagree that IMF recommendations should be taken with a grain of salt, they're hardly the only people speaking out to say this is a bad idea. There has been mass protest against the adoption of Bitcoin across the country citing fears around the stability of the cryptocurrency.

https://www.bbc.com/news/world-latin-america-58579415

leishman• 5 years ago

There have not been “mass” protests. They have been quite small. And a large chunk of those protestors are countryside people paid by US funded NGOs. I’ve been to ES multiple times recently. The fact is most people there are ambivalent about Bitcoin and don’t have a strong opinion about it.

smoldesu2• 5 years ago

I actually agree with you. I just think that an IMF recommendation against using non-dollar-backed currency is hysterical, because of course they'd think that's a bad idea. They rely on adjusting inflation to exacerbate their own wealth, and when decentralized currency gets into the mix, it obviously complicates matters.

Cryptocurrency as a primary method of transaction is 31 flavors of Baskin-Robin disaster. That doesn't make it any less funny when the IMF is complaining about a loss of control.

hyuuu• 5 years ago

of course they'd say that, why would they want to lose the ability in destroying countries' financial stabilities?

BoorishBears• 5 years ago

Yeah... because being played by random whales and pump and dumps has totally different outcomes.

If Bitcoin was actually some country's currency, that country would have imploded by now. Hyperdeflation is just as deadly to an economy as hyperinflation

To the replies about other things affected by those factors: You're kind of making my point. We have countries that built their economies entirely on oil... the ones that diversified seem to be doing just a tad better.

BTC is not saving any economies. It might save some individuals which is not nothing, but please let's not pretend the IMF has some kind of conspiracy against BTC to maintain their control...

sMarsIntruder• 5 years ago

And the pigs are flying

0des5• 5 years ago

being played by random whales

Definitely don't do Forex, or oil, or any commodities trading really.

dragonwriter3• 5 years ago

The IMF tends to have influence in a country only after that country has managed to destroy its own stabilities.

(That's not to say that their help doesn't tend to have adverse side effects, just that the IMF isn't generally doing anything to your economy if you have stability around to destroy.)

aqme28• 5 years ago

I don't know what point you're trying to make.

"They're not so bad. They only exploit the desperate."

f3rnando• 5 years ago

"The IMF tends to have..." If this were true, that country would have disappeared a long time ago. IMHO

0des5• 5 years ago

It is hard not to interpret this as posturing to head off any wise ideas by the only country in a dire enough situation to be swayed by it. Normalizing BTC or other cryptoassets as a transactional currency rather than an asset reframes the way it is treated tax-wise, another interpretation is that it threatens their power structure, which one could imagine challenges the IMF's business model as they're a cooperative of entities focusing on guiding how money is used, distributed, managed, and created. Those controls become hard to enforce on Bitcoin or other cryptoassets when it goes from asset class to transactional class.

ckdarby• 5 years ago

Can someone with expertise or background chime in why the IMF is even making this statement?

josh_today2• 5 years ago

IMF is the closest thing we have to a global entity responsible for managing currency supply and distribution.

Bitcoin undermines their existence.

0des5• 5 years ago

Hello, just a heads up, your account is shadow banned, and unless someone who sees it 'vouches' for your comments, they wont be seen by normal users.

elliekelly2• 5 years ago

Bitcoin is very volatile and offers no consumer protection whatsoever. If a developing nation encourages citizens to buy into Bitcoin for use as legal tender and then Bitcoin crashes (leaving the citizens who bought it with nothing) the result would be an international financial crisis and the IMF would step in to help resolve the matter.

duskwuff• 5 years ago

Additionally, Bitcoin in particular has structural issues (transaction fees, limited transaction rate driven by block size limits) which make it poorly suited for use as legal tender.

Yes, Lightning exists. I know. But it's essentially a system of private IOUs -- it's not something which would always be available to settle a debt between any two people.

dragonwriter3• 5 years ago

Can someone with expertise or background chime in why the IMF is even making this statement?

Because the IMF is right now deeply involved in “stabilizing” Costa Rica’s economy, notionally for effects of the pandemic, at the government’s request.

chucktingle• 5 years ago

Bukele is shorting the dollar by issuing dollar bonds and buying Bitcoin. Of course, the IMF is not happy.

jinpa_zangpo• 5 years ago

The IMF regularly reviews the finances of different countries and makes recommendations. The report guides the government of the country as well as other countries which may provide assistance. This report is part of the IMF's usual cycle and is not in response to President Bukele making bitcoin legal tender in El Salvador, although it discusses that issue. Like most countries El Salvador runs a deficit and relies on foreigners to buy its bonds and financial assistance from other countries.

elliekelly2• 5 years ago

The relevant bit:

13. Efforts to improve financial inclusion and raise growth are welcome, but risks arising from Bitcoin as a legal tender, the new payments ecosystem and trading in Bitcoin should be addressed. Crypto-technologies and digital payment systems like Chivo have the potential to make payments more efficient, thereby enhancing financial inclusion and supporting growth. 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. Like for other e-wallets, Chivo should be required to fully safeguard customers' funds, both in U.S. dollars and Bitcoin, by segregating and ring-fencing reserve assets. Stronger regulation and oversight of the new payment ecosystem should be immediately implemented for consumer protection, anti-money laundering and counter financing of terrorism (AML/CFT), and risk management. Banking regulation should incorporate prudential safeguards such as conservative capital and liquidity requirements related to Bitcoin exposure. Measures to limit fiscal contingent liabilities, such as winding down the trust fund or withdrawing public subsidies to Chivo, should also be promptly considered. Recently announced plans to use the proceeds of new sovereign bond issuances to invest in Bitcoin, and the implications of trading more broadly in Bitcoin, will require a very careful analysis of implications for, and potential risks to, financial stability.

thirdplace_• 5 years ago

It surprises me why bitcoin isn't banned yet. It is a credible threat to internal revenue services all over the world.

felistoria2• 5 years ago

Good

viro• 5 years ago

governments collapsing is a good thing? Do you make it habit to say that level of stupid crap often?

dang4• 5 years ago

Please don't post unsubstantive comments or flamebait comments to HN. It's not what this site is for.

https://news.ycombinator.com/newsguidelines.html

dang4• 5 years ago

Please don't post generic flamewar comments, especially not on classic flamewar topics. It produces low-quality, repetitive, nasty threads, and we're trying to avoid those here.

https://news.ycombinator.com/newsguidelines.html

servytor• 5 years ago

I highly recommend anyone who doesn't know anything about how the IMF interacts with poor countries to watch this documentary called "Life and Debt"[0] which is about how the IMF basically destroyed Jamaica's economy.

Basically, long story short, the IMF will immediately tell a country that they cannot bolster their local companies with tariffs or other legal means, meaning that local food industries (in the example of Jamaica) and numerous other sorts of local businesses immediately go bankrupt due to competition, and joblessness soars.

So the IMF will immediately take advantage of a country and kill basically any law that they have to try and bolster their local economy, in the need for the 'greater good'. Gorramn Tau.

[0] https://en.wikipedia.org/wiki/Life_and_Debt

TaylorAlexander2• 5 years ago

Here’s another one, “War by Other Means” by John Pilger:

https://youtu.be/9Pi1sHbXWXw

splix• 5 years ago

Also "Princes of the Yen", it mentions how IMF took advantage over Asia https://www.youtube.com/watch?v=5-IZZxyb1GI

ChrisLomont2• 5 years ago

Instead of only looking at one side, consider the IMF is mostly a lender of last resort. So when a country needs IMF help, it's IMF or likely even worse outcomes.

If you want a more accurate view, read research papers on google scholar. Here's papers on IMF from 2017 [1].

The short take is the IMF provides lots of help to ailing countries, saves some and loses some. Pop culture doesn't tend to spread news of the winners since spreading lopsided arguments sells more books and blog posts.

Google scholar is a much more balanced and accurate place.

[1] https://scholar.google.com/scholar?as_ylo=2017&q=imf&hl=en&a...

MonkeyClub• 5 years ago

consider the IMF is mostly a lender of last resort

Yep that's an important clarification indeed.

The IMF is a nation's last resort, like loan sharks would be a person's.

The documentaries referenced above seem to draw a picture of the IMF as a financial hit squad.

Haven't watched the Jamaica one yet, will schedule it for the weekend, but I'll be very surprised if it doesn't speak about a pattern of devastating IMF requirements similar to those documented in the others.

Guessnotgauss• 5 years ago

Yeah, I can see how you could frame it that way. But there is some basic context that is missing. Most policies used by the IMF are a result of a developing economy (country) wanting to be competitve on the international level and trade more. These loans are based on policies that dont work and are designed to put those countries into a form of servitude by struggling to repay debts (see import substitution).

https://en.m.wikipedia.org/wiki/Import_substitution_industri...

Another method is to build infrastructure and make it impossible to pay back the interest. The IMF works in concert with the World Bank.

This model of manipulation is the way you rule the empire now. Why fight wars that arent profitable when you can manipulate economies on a macro level.

https://en.m.wikipedia.org/wiki/Confessions_of_an_Economic_H...

dbs• 5 years ago

[0] https://en.wikipedia.org/wiki/Life_and_Debt

It would be good to find a review (positive or negative) of that movie by economists, not movie critics. Until then, call me a skeptic.

antifa• 5 years ago

The ability to find genuine reviews by relevant experts in general would be nice.

weare138• 5 years ago

'A Brief History of Neoliberalism' by David Harvey is also an excellent book on the subject.

cs702• 5 years ago

The editorialized title is linkbait, but the actual IMF page is an interesting read.

Only one small section of the page, Section 13, actually contains the sentence "Bitcoin should not be used as legal tender," but the sentence is conditioned on the country properly addressing the various risks to financial stability mentioned elsewhere in the page. It's unfair to quote only that one sentence, without providing any context.

Section 13 is in fact titled "Efforts to improve financial inclusion and raise growth are welcome, but risks arising from Bitcoin as a legal tender, the new payments ecosystem and trading in Bitcoin should be addressed."

To the moderators: Please consider changing the editorialized title.

tmaly• 5 years ago

the title is taken verbatim from the article.

fabianhjr• 5 years ago

El Salvador: Staff Concluding Statement of the 2021 Article IV Mission

That is the original title from the article.

musicale• 5 years ago

They're not wrong about downsides to bitcoin, and there are many more they haven't mentioned. I tend to think that regular currencies are better than bitcoin for nearly every use case that doesn't involve evading currency or payment regulation.

Yet I can't escape the feeling that the IMF is trying to protect its territory and monopoly.

IMF warns El Salvador: “Bitcoin should not be used as a legal tender”

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