El Salvador wants to create 'Bitcoin free city', IMF says Bitcoin should not be used as fiat currency

El Salvador, the first Central American country to pass a law to include Bitcoin as a currency, seems unsatisfactory.

On November 22, the IMF announced “El Salvador: 2021 Group 4 Survey Conclusions” (hereinafter referred to as “Survey Conclusions”), which examined the use of Bitcoin as fiat. in El Salvador, Bitcoin's watchdog. Resources, Chivo electronic wallet and other content.

El Salvador announced plans to involve the new Bitcoin just two days before announcing the "research deals." Salvadoran President Nayib Bukele announced on November 20 that El Salvador would announce the world's first Bitcoin government bond, starting at $ 1 billion, according to France-Presse. for a currency. Establish Bit City, a tax-deductible cryptocurrency.

This made El Salvador once again the value of cryptocurrency enthusiasts.

IMF says Bitcoin should not be used as fiat currency

According to the “Research Agreement”, El Salvador became the first country to adopt Bitcoin as a viable currency on September 7, 2021. Civo, an electronic wallet that uses US cash and bitcoins makes a profit (citizens of the Chivo app get a free donation of $ 30 in bitcoins).

The IMF noted that it deserves recognition for its efforts to improve financial performance and support the growth of El Salvador's use of Bitcoin as a viable option and the Chivo e-wallet. female sex.

However, the risks of using Bitcoin as a benefit and as a new payment ecosystem for Bitcoin transactions should be mentioned. Given the huge change in the value of Bitcoin, its use as fiat currency could pose significant risks to consumer protection, credit, and financial security, and Bitcoin risk should not be used as fiat currency.

Yu Jianing, director of Huo University Education and chairman of the meta-universe industry committee of the China Federation of Mobile Communications, author of CITIC's new book “Metro Universe”, told reporters, “The responsibility of the IMF is to monitor currency exchange rates and exchange rates, the multinational economy and the use of technology and finance to support the functioning of the global financial economy, but in the face of El Salvador's insistence on that Bitcoin is used as fiat currency, it is risky, it is a warning and a warning, and no force can be taken against it.

“On the other hand, El Salvador is discussing a billion dollar budget plan with the IMF, because important IMF data also includes loans to countries in crisis. The investment plan has been called into question and the IMF report forced banks to reduce El Salvador's high risk El Salvador, as a national example, Bitcoin in El Salvador before Citi analyst Donato Guarino affected contract evidence .

In this regard, IMF analysts have called for a reduction in Bitcoin legislation and a stricter review of the new payments ecosystem. Chivo e-wallet immediately uses tighter controls and monitoring of new payments to protect consumers' USD and Bitcoin funds by segregating resources and protecting consumer equipment use, anti-money laundering. money and money laundering (AML / CFT). should. management.

The IMF investigator also noted in particular that Salvadoran bank executives should adhere to good safeguards, such as savings and risk mitigation regarding Bitcoin's risks. for Chibo.

IMF warns El Salvador is facing the effects of the new global disease (COVID-19), tightening monetary policy further increases borrowing rates, and regulations do not affect spending. Bitcoin is hurting the market. . .

Zhu Youping, author of “Chain Reform: A Chinese Thinking Blockchain,” told a China Times reporter, “His own gains will inevitably affect the current global financial system in fiat currency, based on the US dollar. Supporters of Bitcoin in El Salvador are somewhat weak for their role in negotiations with the International Monetary Fund (IMF).

"Some believe that El Salvador's request for a billion dollar loan from the IMF has been delayed, and this has something to do with it, due to the difference in the interest rate on the government contract. Salvadoran and US Treasuries (.JPEGDELSR) rose. "Last September, 1,100bp hit historic levels. This is at a stage that almost prevents entry into financial markets. loan agreement with the IMF is particularly important for the economy and national finances, ”Zhu Youping added.

Create a "City without Bitcoin"

According to Salvadoran President Nayib Bukele, “Bit City” will be located in La Union City, El Salvador, with an estimated home value of around 300,000 BTC. As of November 23, $ 160.1 billion. The city is exempt from income tax, property tax, and capital gains tax, and only 10% VAT is used to pay for development and services in the city.

Yu Jianing: “El Salvador expands the application of Bitcoin and creates the world's first Bitcoin city. He has his own needs and goals. It also represents the exchange in the region that has suffered. Long awaited by the hegemony of the US dollar. But since El Salvador's currencies were only thousands of dollars at first, it now looks like a huge financial attempt to embrace Bitcoin, Gerry Rice, including International Monetary Fund (IMF) spokesperson, once said: it is used as currency has led to macroeconomic, financial and legal issues that must be carefully considered. "

Naib Bukler explains that the town of La Union is close to the Conchagua volcano, which will provide energy for the excavation.

However, the reporter reported that official data from El Salvador shows that the government now has 1,120 bitcoins, which is a far cry from the 300,000 bitcoins used to create “small towns”.

To this end, the President of El Salvador announced the announcement of a Bitcoin government bond called “Volcanic Bonds” to be issued by Blockstream. Coupon price at 6.5%. The funds had a five-year close period after which the government started selling bitcoin and paying dividends to investors.

According to the plan, half of the funds from the “volcanic contract” will be transferred to Bitcoin and the other half will be used to build the “Bit City” infrastructure and mine Bitcoin. Naib Bukler said: "The first deal is expected to be announced in 2022 and made public in less than 30 days," Naib Bukler said.

The reporter said the IMF decided to use it to finance the purchase of Bitcoin and the construction of Bitcoin City's infrastructure related to Bitcoin. the police. The IMF has mentioned the need to carefully consider the financial security implications and the potential risks for plans used to invest Bitcoin financial bond income should be announced to invest in bitcoin and the bitcoin market in general.

Zhu Youping said, “Our country is governed by the policy of“ Chain Support, Coins Restriction, Straighten and Update. ”Bitcoin mining and trading is at stake. What El Salvador isn't right for you maybe not. And while El Salvador, however, will not have a major impact on the global financial system, but I think "we have to be very careful and follow the bullets to fly to the present moment in the Salvador ”.