IMF Urges El Salvador to Restrict Cryptocurrencies as Legal Tender Amid Money Laundering Risks

Richard Marley
January 26, 2022
2 minutes read
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The International Monetary Fund (IMF) is persuading El Salvador to revoke the initiative of making bitcoin as a legal tender, citing money laundering risk linked with digital currencies.

The IML published a report on Tuesday, in which details regarding its stances why the Central American Nations should restrict the cryptocurrency usage and narrow down the Bitcoin law, which was passed in June 2021, after being approved by senate members.

Bitcoin’s use as legal tender “entails large risks for financial and market integrity, financial stability, and consumer protection,” they said in the report. “It also can create contingent liabilities.”

The IMF directors are calling for stricter cryptocurrency regulation for Chino, El Salvador’s official e-wallet, and highlighted their concerns over the risk linked with the issuing of bitcoin-powered bonds. While these bonds complimented the nation for “rebounding quickly” amid the coronavirus pandemic, which has helped reduce the economic crisis in-country. The IMF directors also pointed out the El Salvador fiscal vulnerabilities, arising from the public debt-to-GDP ratio, which authorities said, have increased.

The IMF’s board urged El Salvador to strip Bitcoin of its status as legal tender in the country, citing risks to “financial stability, financial integrity, and consumer protection” https://t.co/Uwiu5vhVA7

— Bloomberg (@business) January 25, 2022

In addition to this, IMF has also advised El Salvador to enhance and streamline its anti-corruption, Anti-Money Laundering (AML), and Counter-Terrorism Financing (CTF) framework with global standards.

However, this was not the first time the IMF has raised concerns over El Salvador’s move of making bitcoin a legal tender. Other than this, the financial institution said that adopting bitcoin as an official tender “raises a number of macroeconomic, financial, and legal issues that require very careful analysis.”

El Salvador became the first country in September 2021 when it officially made cryptocurrencies legal to elevate the virtual assets as equal to the US dollar, its other local currency. Since then, the country has brought more than 1,000 coins.

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IMF Urges Central Bank of Seychelles to Upgrade Transparency and AML Controls
The Central Bank of Seychelles (CBS) has been advised by the International Monetary Fund (IMF) to have transparent practices and AML controls.

The International Monetary Fund (IMF) has urged CBS, the Central Bank of Seychelles, to incorporate refined practices in different accountability and governance areas. These include confidentiality, supervisory & confidentiality policies along with internal AML/CFT protocols.

According to the statement by IMF, CBS is giving information regarding legal structure, mandate, and a few key elements related to anti-corruption arrangements, risk and human resource management, and accountability on its website.

The review of IMF stated, “To better support the public’s perception of the CBS as a well-governed institution, it should consider highlighting these aspects in its annual report, and/or provide additional information on its website, particularly on human capital management, anti-corruption policies and decision-making arrangements.”

As per IMF’s review, CBS needs to work on several elements, including information’s accessibility to its internal governance arrangements. It could be done by maintaining the Annual Report’s respective sections and website. Moreover, it must overhaul the proceedings by publishing its Code of Conduct and Ethics.

“The legal mechanism for confidentiality issues has been established, but the dissemination and disclosure of the confidentiality framework could be enhanced. The CBS discloses basic information on its AML/CFT supervisory powers and policies, as well as on its related internal control framework, but disclosures on the processes and outcomes of its AML/CFT external policies and internal controls are limited,” said CBS Transparency Code Review of IMF.

IMF review said that the ensurance of transparency practices with new functions and powers by CBS would be effective for its own benefit. The practices adopted by CBS must comply with the powers acquired by the coming legislative act.

IMF’s CBS Transparency Code Review said, “In the last few years, the CBS’s regulatory powers have been substantially expanded with the adoption of AML/CFT Act and Financial Consumer Protection Act. Moreover, the forthcoming Financial Stability Act is expected to provide a transparent legal basis for the CBS’s (and other financial sector regulators) actions on financial stability. These legislative acts will require an expansion of the CBS’s transparency practices so that the related CBS activities continue to be appropriately disclosed to stakeholders.”

The review aims to identify the strength and improvement areas of CBS by allowing it to evaluate its transparency practices. The review presents the map of CBS’s transparency choices in comparison to several practices in three different categories (core, comprehensive, and expanded).

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IMF Urges El Salvador to Restrict Cryptocurrencies as Legal Tender Amid Money Laundering Risks

An Overview of Perpetual KYC

The Need for Perpetual KYC in Banking Sector

Recent Crime Cases in the Banking Industry

Criminal Gang in US Charged with Bank Fraud and Money Laundering

Two Former Employees of Major Bank Charged with Loan Fraud

Global Regulatory Authorities Monitoring the Banking Sector

US

UK

Securing Banking Organizations Through Perpetual KYC

What Shufti Pro Offers?

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