RIYADH: The International Monetary Fund warned El Salvador against using bitcoin as official tender given the risks associated with the cryptocurrency, a day after the country announced plans for the world’s first Bitcoin City.

“Given Bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability,” the IMF said in a statement after concluding a monitoring mission to the Central American country.

“Its use also gives rise to fiscal contingent liabilities. Because of those risks, bitcoin should not be used as a legal tender.”

The Washington-based lender thus recommended “narrowing the scope of the bitcoin law” that made it official currency and urged “strengthening the regulation and supervision of the new payment ecosystem.”

The IMF statement came a day after President Nayib Bukele said El Salvador plans to build a “Bitcoin City” powered by a volcano and financed by cryptocurrency bonds.

Crypto is not a fad

Australian Sen. Jane Hume spoke about cryptocurrency and decentralized finance (DeFi) on Monday during her speech at the Australian Financial Review Super & Wealth Summit in Sydney.

Hume said they need to acknowledge that cryptocurrency is not a fad, adding that there are huge opportunities in decentralized finance (DeFi).

“So as an industry, and as a government, we need to acknowledge this is not a fad. We should tread cautiously, but not fearfully,” Hume said.

According to a new Australian Senate committee report, 17 percent of Australians invest in cryptocurrency.

“This is an asset class that has captured hearts and minds, but beyond that — whatever you might personally think — it’s a technology that’s not going away any time soon,” she said.

Daily trading

Bitcoin, the leading cryptocurrency in trading internationally, traded lower on Tuesday, falling by 1.83  percent to $57,274 at 6:21 p.m. Riyadh time.

Ether, the second most traded cryptocurrency, traded at $4,296, up by 1.25 percent, according to data from CoinDesk.