El Salvador is negotiating a $1.4 billion loan with the International Monetary Fund (IMF), necessitating significant adjustments to its Bitcoin policies.

A key change involves the government’s Chivo wallet, introduced in 2021 to promote Bitcoin adoption. Stacy Herbert, director of El Salvador’s Bitcoin Office, announced that Chivo will be “sold off or wound down” as part of the IMF agreement. Private companies’ Bitcoin wallets will continue operating in the country.

The IMF has stipulated that Bitcoin acceptance by businesses should become voluntary, reversing the current mandate requiring all merchants to accept the cryptocurrency. Additionally, taxes will be payable exclusively in U.S. dollars, and public sector involvement in Bitcoin-related activities will be limited.

Despite these concessions, El Salvador remains committed to Bitcoin. Herbert indicated that the country will continue adding Bitcoin to its reserves, potentially at an “accelerated pace.” Currently, El Salvador purchases one Bitcoin per day and holds approximately 5,968 Bitcoins, valued at nearly $596 million. Furthermore, Bitcoin’s status as legal tender will remain unchanged, and initiatives such as developing Bitcoin capital markets and educational programs will proceed.

The IMF has expressed concerns about the risks associated with Bitcoin’s volatility since El Salvador adopted it as legal tender in September 2021. In 2022, the IMF warned of “large risks” linked to Bitcoin’s use, emphasizing potential threats to financial stability.

Public adoption of Bitcoin in El Salvador has been limited. Despite incentives, such as offering $30 in Bitcoin to Chivo users, a significant portion of the population has not embraced the cryptocurrency. A survey by the Central American University in January revealed that 88% of Salvadorans hadn’t used Bitcoin in 2023.

The IMF’s $1.4 billion loan is expected to be supplemented by additional funds from the World Bank, the Inter-American Development Bank, and regional development banks, bringing the total to $3.5 billion. This financial support aims to bolster El Salvador’s economic stability and growth.

In summary, while El Salvador is set to modify certain aspects of its Bitcoin policies to secure IMF funding, the nation remains steadfast in its commitment to Bitcoin as legal tender and plans to continue its Bitcoin-related initiatives.

👉Join our Trading Community’s newsletter!👈

Finally, if you learned something, give us some love 💗 and SHARE. 🔁