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As Bitcoin Tumbles, IMF Slams El Salvador’s Crypto Embrace

The International Monetary Fund on Tuesday urged El Salvador to end its recognition of bitcoin as legal tender. Adopting a cryptocurrency in this manner “carries significant risks to financial and market integrity, financial stability, and consumer protection,” the fund’s board wrote.

The price of Bitcoin has fallen more than 50% from its peak in November, and the cryptocurrency market as a whole has lost over $1 trillion in value during this time. For top-tier institutions that have purchased Bitcoin, from the Salvadoran government to some multinational corporations, the slowdown could prove costly and create regulatory headaches, the DealBook newsletter reports.

A year ago, when the meme stock frenzy was about to turn into a crypto boom, Bitcoin was worth just over $30,000. Since then, its price has more than doubled and then given up the gains. Crypto evangelists like President Nayib Bukele of El Salvador, Elon Musk of Tesla and Michael Saylor of MicroStrategy seem undeterred.

El Salvador has spent around $85.5 million on Bitcoin since adopting the cryptocurrency as legal tender in September, including a purchase of 15 million dollars a few days ago, during the last drop. The country paid an average of around $47,500 per bitcoin, and the current price is around $37,000, which means the Salvadorian investment lost around 23% of its value.

“Most people enter when the price is up, but the safest and most profitable time to buy is when the price is down,” Bukele said. said on Twitter, where he announces Bitcoin purchases and berates critics of this investment strategy. “It’s not rocket science.”

MicroStrategy is also recession proof. The business intelligence software company spent around $3.75 billion on Bitcoin, an investment that is now worth about $4.5 billion. The company’s chief financial officer said The Wall Street Journal that he would continue to buy.

But holding cryptocurrency is an accounting problem. In December, the Securities and Exchange Commission asked MicroStrategy to review the way it reports the value of its large bitcoin holdings.

MicroStrategy argued that crypto should be treated like other assets, with gains and losses recognized immediately. The SEC treats Bitcoin as an intangible asset, with losses reflected in write-downs but gains recognized only on a 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.)

From an accounting perspective, therefore, holding on to crypto can only be a neutral or losing proposition.