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As Bitcoin Drops, IMF Criticizes El Salvador’s Crypto Acceptance

The International Monetary Fund urged El Salvador on Tuesday to end its recognition of Bitcoin as legal tender. Accepting cryptocurrencies in this way “results in major risks to market and financial integrity, financial stability, and consumer protection.” fund management wrote.

Bitcoin price has dropped more than 50% from its peak in November, and the crypto market as a whole has lost more than $1 trillion in value in that time. For well-known institutions that have bought into Bitcoin, from the government of El Salvador to several multinational corporations, a downturn can be costly – and can create regulatory headaches, DealBook newsletter report.

A year ago, when the meme-stock craze was about to turn into a crypto boom, Bitcoin was worth just over $30,000. Since then, it has doubled in price and then gave up gains. Cryptocurrency evangelists like El Salvador’s President Nayib Bukele, Tesla’s Elon Musk, and MicroStrategy’s Michael Saylor seem undaunted.

El Salvador has spent around $85.5 million on Bitcoin since adopting the cryptocurrency as a legal tender in September, including one time buy 15 million dollars a few days ago, during the most recent sale. The country paid an average of about $47,500 per Bitcoin and the current price is around $37,000, meaning that the investment in Salvador has lost about 23 percent of its value.

“Most people buy when prices go up, but the safest and most profitable time to buy is when prices fall,” said Bukele. say on Twitter, where he talks about buying Bitcoin and hits back at critics of the investment strategy. “It’s not rocket science.”

MicroStrategy is also unmoved by the downturn. The business intelligence software company spent about $3.75 billion on Bitcoin, an investment now worth about 4.5 billion dollars. The company’s chief financial officer told The Wall Street Journal that it will continue to buy.

But holding crypto is a complicated matter of accounting. In December, the Securities and Exchange Commission asked MicroStrategy to review how it reports the value of its massive Bitcoin holdings.

MicroStrategy argues that cryptocurrencies should be treated like other assets, with profits and losses recognized immediately. The SEC treats Bitcoin as intangibles, with losses being reflected by declines but profits being recognized only on sale. (Tesla, which bought $1.5 billion in Bitcoin last year, reports quarterly results on Wednesday and may face questions about the value of its holdings.)

So from an accounting perspective, holding crypto can only be a neutral proposition or a loss.

https://www.nytimes.com/2022/01/26/business/bitcoin-el-salvador.html As Bitcoin Drops, IMF Criticizes El Salvador’s Crypto Acceptance

Fry Electronics Team

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