IMF warns El Salvador: “Bitcoin should not be used as a legal tender”(imf.org)
imf.org
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
74 comments
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...
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...
> 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.
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.
It's good that you know what's better for countries than the countries themselves. You should volunteer to help them.
If countries are in so much trouble they need the IMF they might not no better (or more likely, have the political options to do what is needed).
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...
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...
Here’s another one, “War by Other Means” by John Pilger:
https://youtu.be/9Pi1sHbXWXw
https://youtu.be/9Pi1sHbXWXw
Also "Princes of the Yen", it mentions how IMF took advantage over Asia https://www.youtube.com/watch?v=5-IZZxyb1GI
Great thank you. I am very interested in alternative ways to organize the global economy that are more equitable and fair so I appreciate the link.
I should also mention Naomi Klein's No Logo. https://www.youtube.com/watch?v=oeTgLKNb5R0
I should also mention Naomi Klein's No Logo. https://www.youtube.com/watch?v=oeTgLKNb5R0
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[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.
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.
The ability to find genuine reviews by relevant experts in general would be nice.
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'A Brief History of Neoliberalism' by David Harvey is also an excellent book on the subject.
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.
> 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.
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.
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.
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.
Yet I can't escape the feeling that the IMF is trying to protect its territory and monopoly.
of course they'd say that, why would they want to lose the ability in destroying countries' financial stabilities?
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.)
(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.)
I don't know what point you're trying to make.
"They're not so bad. They only exploit the desperate."
"They're not so bad. They only exploit the desperate."
Are you talking about IMF or Bitcoin?
More seriously, that's not what GP meant at all. GP's point is that IMF usually steps in only after a country managed to paint itself into a financial corner - at this point there's no "nice" solution any more, and you're guaranteed to deal with mass unemployment, people losing their life savings, inflation, and so on.
Of course the debate is ongoing whether IMF's proposed solutions are actually in the best interest of the countries on the receiving end, but you know, if they don't like the deal these countries can always refuse it.
More seriously, that's not what GP meant at all. GP's point is that IMF usually steps in only after a country managed to paint itself into a financial corner - at this point there's no "nice" solution any more, and you're guaranteed to deal with mass unemployment, people losing their life savings, inflation, and so on.
Of course the debate is ongoing whether IMF's proposed solutions are actually in the best interest of the countries on the receiving end, but you know, if they don't like the deal these countries can always refuse it.
> I don't know what point you're trying to make.
That the description of them destroying stability has a false premise. I mean, how much more explicit could be?
If you are looking for a secret ulterior motive, the difficulty is because there isn’t one.
That the description of them destroying stability has a false premise. I mean, how much more explicit could be?
If you are looking for a secret ulterior motive, the difficulty is because there isn’t one.
'Loan sharks are not bad people, if you have your own money.'
> "The IMF tends to have..."
If this were true, that country would have disappeared a long time ago. IMHO
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
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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...
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...
> being played by random whales
Definitely don't do Forex, or oil, or any commodities trading really.
Definitely don't do Forex, or oil, or any commodities trading really.
There's a difference between trading commodities and using a currency whose value behaves like that of a commodity. In the former case you've willingly taken on risk of price fluctuations. In the latter, you're saddled with the risk while trying to conduct normal transactions.
Hmm, it's almost like there's a reason why fiat currencies took off, and the BTC folks are rediscovering that.
WRT forex trading, has there been a "random whale" event in say, a top 15 economy, since Black Wednesday?
WRT forex trading, has there been a "random whale" event in say, a top 15 economy, since Black Wednesday?
And the pigs are flying
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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.
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I'll trust a press release from The Muppets before I take a recommendation from the IMF seriously.
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
https://www.bbc.com/news/world-latin-america-58579415
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.
> 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.
https://www.reuters.com/technology/majority-salvadorans-do-n...
> SAN SALVADOR, Sept 2 (Reuters) - Most Salvadorans disagree with the government's decision to adopt bitcoin as legal tender, with many unaware of how to use the digital currency and distrustful of the project, a poll by the Central American University (UCA) showed on Thursday.
> At least 67.9% of 1,281 people surveyed said they disagree or strongly disagree with the use of bitcoin as a legal tender, said the poll by UCA, a Jesuit university based in El Salvador. Just over 32% of people said they agree on some level.
Seems the majority of people disagree with this action.
> And a large chunk of those protestors are countryside people paid by US funded NGOs.
That's a broad claim, of which I don't find any evidence. Do you have references here?
https://www.reuters.com/technology/majority-salvadorans-do-n...
> SAN SALVADOR, Sept 2 (Reuters) - Most Salvadorans disagree with the government's decision to adopt bitcoin as legal tender, with many unaware of how to use the digital currency and distrustful of the project, a poll by the Central American University (UCA) showed on Thursday.
> At least 67.9% of 1,281 people surveyed said they disagree or strongly disagree with the use of bitcoin as a legal tender, said the poll by UCA, a Jesuit university based in El Salvador. Just over 32% of people said they agree on some level.
Seems the majority of people disagree with this action.
> And a large chunk of those protestors are countryside people paid by US funded NGOs.
That's a broad claim, of which I don't find any evidence. Do you have references here?
Most people are ignorant about Bitcoin and its risks; The fact that there are no protests should come as a surprise to no one.
What people see is that they get free money from the government and maybe they’re lucky to see it go up. They don’t know it could be half tomorrow.
What people see is that they get free money from the government and maybe they’re lucky to see it go up. They don’t know it could be half tomorrow.
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.
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.
Can someone with expertise or background chime in why the IMF is even making this statement?
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.
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.
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.
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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.
> 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.
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.
IMF is the closest thing we have to a global entity responsible for managing currency supply and distribution.
Bitcoin undermines their existence.
Bitcoin undermines their existence.
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.
They are not shadow banned. They were explicitly banned.
https://news.ycombinator.com/item?id=29091010
If there's something in the comment you want to respond to, great: then add your comment.
https://news.ycombinator.com/item?id=29091010
If there's something in the comment you want to respond to, great: then add your comment.
So, um, what does "banned" mean if they can continue to post?
As typically used, the term "shadow banned" is a ban without alerting the user that they are banned. That's not the case here. On HN, "banning" means to to have your posts be dead by default. And "banned" is the language 'dang himself used in the message to the user.
Wow got banned for saying a 200% tax on gasoline is another example of a government looking to tax the population into poverty and dependence.
The entire web is 1984 now. Crazy couple years
The entire web is 1984 now. Crazy couple years
We banned your account for breaking HN's rules, as I explained to you when I banned it: https://news.ycombinator.com/item?id=29127479.
It has nothing to do with your particular statement about gasoline taxes or anything else. You could have made exactly the opposite statement and it would have had the same effect. The deeper issue is that HN is not a site for people who want to defeat their political enemies; it's a site for people who want to have curious conversation and learn from each other. I don't think that's too hard to understand.
It has nothing to do with your particular statement about gasoline taxes or anything else. You could have made exactly the opposite statement and it would have had the same effect. The deeper issue is that HN is not a site for people who want to defeat their political enemies; it's a site for people who want to have curious conversation and learn from each other. I don't think that's too hard to understand.
I’m a normal user and I can see their message. Has it been vouched for in the past 4 minutes? My settings are still the HN defaults.
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Bukele is shorting the dollar by issuing dollar bonds and buying Bitcoin. Of course, the IMF is not happy.
It surprises me why bitcoin isn't banned yet. It is a credible threat to internal revenue services all over the world.
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
https://news.ycombinator.com/newsguidelines.html
Good
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
https://news.ycombinator.com/newsguidelines.html
Sorry about that.
governments collapsing is a good thing? Do you make it habit to say that level of stupid crap often?
Please don't reply to a bad comment by breaking the site guidelines yourself. It only makes things worse, and you did it egregiously here.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newsguidelines.html
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