El Salvador is poised to implement significant changes regarding its use of Bitcoin as part of a new $1.4 billion loan agreement with the International Monetary Fund (IMF). Under this deal, the country will transition to a voluntary framework for Bitcoin acceptance by merchants, scale back its involvement with the Chivo digital wallet, and restrict public sector activities related to Bitcoin .
The IMF, in a recent statement, announced that El Salvador will receive the funds over the next 40 months, contingent upon the country’s commitment to policies aimed at reducing its debt-to-GDP ratio. This shift comes in response to concerns about the risks associated with Bitcoin , which the IMF believes will be mitigated by implementing legal reforms that make private sector adoption of the cryptocurrency optional. Furthermore, government transactions involving Bitcoin will be limited.
Since beginning its Bitcoin accumulation in 2021, El Salvador has amassed a holding of nearly 5,969 Bitcoin , valued at approximately $602 million. This ambitious crypto initiative has attracted scrutiny, particularly given reports indicating that a vast majority of the Salvadoran population remains largely disinterested in using Bitcoin for transactions. A survey conducted in October revealed that 92% of respondents do not utilize Bitcoin , up from 88% earlier in the year.
The IMF’s declaration follows ongoing negotiations with El Salvador, which have been complicated by President Nayib Bukele’s controversial decision to designate Bitcoin as legal tender in June 2021. The global financial institution has consistently advised against the country’s Bitcoin strategy, cautioning that the volatile nature of cryptocurrencies poses economic risks.
In addition to the IMF’s financial support, other international banks, including the World Bank, are expected to contribute to a cumulative funding package exceeding $3.5 billion as El Salvador navigates this pivotal economic transition.
