The International Monetary Fund (IMF) Tuesday called on El Salvador to drop the highly volatile cryptocurrency Bitcoin as legal tender, citing "large risks" posed by the cryptocurrency, joining a growing chorus of countries clamping down on private digital currencies.

The Latin American country in September became the first country in the world to embrace digital money, allowing consumers to use it in all transactions, alongside the United States dollar.

The call by the Washington-based crisis lender came as the cryptocurrency dropped in value amid wider volatility on Wall Street in recent days, undoing much of the gains it had made during a record-setting climb in value last year.

The IMF staff had previously called on El Salvador's President Nayib Bukele to reconsider putting Bitcoin at the center of his country's finances.

The latest pronouncement used much stronger language and came from the IMF's board, which is comprised of representatives of member governments, including the United States.

The global lender's board "urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin's legal tender status," the IMF said in a statement.

They "stressed that there are large risks associated with the use of Bitcoin on financial stability, financial integrity and consumer protection" and with issuing Bitcoin-backed bonds.

In response, El Salvador's Treasury Minister Alejandro Zelaya noted the IMF's agreement that boosting financial inclusion was important and that an e-wallet could help, to which he added via Twitter: "It appears to work for financial inclusion, but you mustn't do it. The future waits for no one. #Bitcoin."

Bitcoin was trading at about $37,000 on Tuesday, having lost about half its value compared to the record of $67,734 hit in November.

It fell to its lowest point since July on Monday, dipping below $33,000 before recovering.

'Bitcoin city'

Bitcoin shot up in value in 2021 as Wall Street showed a growing appetite for cryptocurrency, while Tesla boss Elon Musk's controversial tweets about the digital assets helped the market rise and fall alike.

The trend was not lost on Bukele, who was elected in 2019 with promises to fight organized crime and improve security in his violence-wrecked country.

His move last September to legalize Bitcoin in El Salvador drew worldwide attention and sparked protests on the streets of the capital San Salvador that were also over his administration's judicial reforms, which critics said threaten democracy.

Thousands took to the streets carrying signs reading "No to Bitcoin" and at one point burning one of the Bitcoin ATMs that had been installed nationwide.

They didn't appear to deter Bukele, who announced in November plans to build the world's first "Bitcoin City," powered by a volcano and financed by $1 billion cryptocurrency bonds.

His administration had also taken advantage of price drops to buy digital assets for the country.

No IMF enthusiasm

The IMF was wary of the cryptocurrency's adoption from the start, with spokesperson Gerry Rice saying before Bukele made the move official, "Adoption of Bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis."

In Tuesday's statement from the board, they noted the fund supports the aim of "boosting financial inclusion," which could be advanced using the country's "Chivo" e-wallet but warned about the high levels of volatility in the cryptocurrency's exchange rate.

Bitcoin's value has shown some correlation with Wall Street equities, but pressure has also come from China's crackdown on the trading and mining of cryptocurrencies and also the risk of wider regulatory action from the likes of Europe and the U.S.

Analysts also say it faces increased competition in 2022 from rival digital assets like Ethereum.

Advocates of cryptocurrencies – particularly in developing nations – say they are an effective hedge against hyperinflation and uncertainty.

But the crypto market is increasingly dominated by big investors, and authorities fear that the highly volatile digital currencies could undermine their control of the financial and monetary systems, increase systemic risk, promote financial crime and hurt small investors.

Here is a look at the countries that have recently regulated, or plan to regulate, cryptocurrencies.

Russia

Russia's central bank last week proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, citizens' wellbeing and its monetary policy sovereignty, as well as high energy consumption.

Russia – the world's third-largest player in Bitcoin mining – has argued for years against cryptocurrencies, saying they can be used in money laundering or to finance terrorism. It gave them legal status in 2020 but banned their use as a means of payment.

Indonesia

Indonesia's Financial Services Authority (OJK) this week said that financial firms are not allowed to offer and facilitate sales of crypto assets in the country where cryptocurrencies cannot legally be used for payment.

Last year, the Indonesian Ulema Council (MUI), a top body of clerics, likened trading of cryptocurrencies to gambling and said that using them as a means of payment is unlawful in Islam because they carry elements of uncertainty and harm.

India

The Indian government has said it was looking to bar most private cryptocurrencies in a new bill that would allow only certain cryptos to promote the underlying technology and its uses.

The country's central bank has also voiced "serious concerns" about cryptocurrencies and is set to launch its own digital currency.

Prime Minister Narendra Modi has said it is important for democratic nations to cooperate on regulating cryptocurrencies so they did not fall into the "wrong hands" and corrupt the youth.

Pakistan

Pakistan's central bank earlier this month recommended banning cryptocurrencies, arguing that allowing them to be traded would cause capital flight.

"After a careful risk-benefit analysis, it emerged that risks of cryptocurrency far outweigh its benefits for Pakistan," it said in a report.

Singapore

The Monetary Authority of Singapore (MAS) last week banned all advertising of crypto assets, including ads through social media influencers. Companies can only market them on their own websites and social media platforms.

While the central bank "strongly encourages" the development of blockchain technology and innovative applications of crypto tokens, the trading of cryptocurrencies is "highly risky and not suitable for the general public," the MAS said in a statement.

Service providers should not portray trading of cryptocurrencies in a manner that "trivializes the high risks" of trading in them, it said.

Spain

Also last week, Spain regulated the advertising of crypto assets, including by social media influencers, and requires any advertising to include warnings about the risks involved.

Australia

Australia last month said it will create a licensing framework for cryptocurrency exchanges and consider launching a retail central bank for digital currency.

The government will begin consultation this year on establishing a licensing framework for digital exchanges, allowing the purchase and sale of crypto assets by consumers in a regulated environment, authorities said.

China

Regulators in China intensified a crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining in September, after barring financial institutions and payment companies from providing services related to crypto transactions in May, as well as previously in 2013 and 2017.

China sees cryptocurrencies as a threat to its sovereign digital yuan, which is at an advanced pilot stage.

Before the ban, China accounted for more than half the world's crypto supply, and miners have since moved elsewhere.

Turkey

Turkey continues to take steps regarding cryptocurrencies, which have become a matter of concern for many governments and central banks, after President Recep Tayyip Erdoğan said in December that the law on cryptocurrency is ready.

Nigeria

Nigeria's central bank barred local banks from dealing in or facilitating transactions in cryptocurrencies last year, reinforcing restrictions that have been in place since 2017.

The ban has pushed the industry underground, with Nigerians trading between themselves using mobile messaging apps and platforms such as Binance and Paxful. This has opened them up to scams and the risk of arrest.