The International Monetary Fund (IMF) Executive Board has concluded a 2021 ‘Article IV Consultation’ with El Salvador urging the country to stop using Bitcoin as the legal tender.

The board emphasised a need for strict regulation and oversight of the new ecosystem of digital e-wallet Chivo and Bitcoin.

It stressed there were large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.

It urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.

Some directors also expressed concern over the risks associated with issuing Bitcoin-backed bonds.

Key benefits of Bitcoin listed by El Salvador’s digital wallet include its use as a global currency that will open the country to international markets, an ability to save in remittances by removal of intermediaries, and as a foreign investment which can improve the country’s economy.

Last year, The IMF’s Western Hemisphere Department acting director, Nigel Chalk, said the IMF would continue its cooperation with the El Salvador government regarding the country’s adoption of Bitcoin as legal tender.

However, he then expressed concerns about El Salvador’s decision, adding that it raises fiscal and financial stability questions.

“There are fiscal issues that are associated with the adoption of Bitcoin as legal currency,” he said.