Key Takeaways:
- Bitcoin Policy Shift: El Salvador’s $1.4B IMF deal makes Bitcoin acceptance voluntary for businesses and limits government Bitcoin projects, including scaling back the Chivo wallet.
- Debt Reduction Focus: The IMF agreement emphasizes reducing El Salvador’s debt-to-GDP ratio and maintaining U.S. dollars for taxes.
- Low Adoption: Surveys show over 90% of Salvadorans don’t use Bitcoin, highlighting public skepticism despite the government’s significant holdings.
El Salvador has reached a $1.4 billion loan agreement with the International Monetary Fund (IMF), committing to significant policy changes that include scaling back its Bitcoin initiatives.
Under the 40-month deal, businesses will no longer be required to accept Bitcoin, making its use voluntary.
The IMF and the EL Salvador government have reached a staff-level agreement on a 40-month EFF arrangement to support the government's economic reforms. The agreement with 🇸🇻 is subject to approval by the IMF Executive Board. https://t.co/1GLjFsEhVl pic.twitter.com/M1U77Flz4f
— IMF (@IMFNews) December 18, 2024
The government will also reduce its involvement in Bitcoin-related activities, including phasing out its state-backed Chivo wallet.
Taxes and public transactions will remain in U.S. dollars, the nation’s official currency.
El Salvador adopted Bitcoin as legal tender in 2021, becoming the first country to do so.
Despite the government holding nearly 6,000 BTC (valued at $602 million), Bitcoin usage among citizens remains low, with surveys showing over 90% of Salvadorans do not use it for transactions.
The IMF has consistently criticized the speculative nature of cryptocurrencies, raising concerns about economic risks.
The agreement aims to lower El Salvador’s debt-to-GDP ratio and could unlock additional global financing, potentially exceeding $3.5 billion.
This marks a significant shift in President Nayib Bukele’s pro-Bitcoin strategy, though the cryptocurrency retains its legal status.
The IMF’s Executive Board must still approve the deal, signaling a move toward reducing Bitcoin’s prominence in the country’s economic policies.
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Efe Bravo, a seasoned journalist, delivers compelling insights into the cryptocurrency and blockchain industry.
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