El Salvador bought 11 BTC, increasing its reserves to 5,980 BTC, worth around $580 million.
The IMF deal requires scaling back government Bitcoin activities, including shutting down the Chivo wallet.
Bitcoin remains legal tender, and El Salvador plans to continue buying Bitcoin for its reserves.
El Salvador has been purchasing 11 BTC for $1 million, a day after reaching a $1.4 billion loan agreement with the International Monetary Fund (IMF).
This purchase adds to the country’s growing Bitcoin reserves, totalling nearly 6,000 BTC, valued at around $580 million. However, this move comes at a critical moment when the country’s controversial Bitcoin policies are under scrutiny due to an agreement with the IMF that requires scaling back government involvement in cryptocurrency.
In 2021, El Salvador is the first country to adopt Bitcoin as legal tender. President Nayib Bukele championed this bold move to increase the country’s economy, especially in remittances and financial inclusion.
However, the adoption of Bitcoin has not been without challenges. A significant portion of the Salvadoran population has shown ignorance to embrace cryptocurrency. With surveys indicating that nearly 88% of citizens did not use Bitcoin in 2023.
Purchase of Bitcoin Despite IMF warning
Despite these challenges, El Salvador’s government has continued to invest in Bitcoin and plans to accelerate its purchases. According to Stacy Herbert, Director of the National Bitcoin Office, the government intends to keep buying Bitcoin. For its Strategic Bitcoin Reserve, potentially at a faster pace. This commitment to Bitcoin remains strong, even as the IMF has urged the government to scale back its activities.
As part of the loan deal, the IMF has imposed conditions that limit the government’s Bitcoin-related economic activities, including transactions and purchases. The country has agreed to the voluntary use of Bitcoin in the private sector, discontinuing the government-operated Chivo wallet and ensuring that taxes remain payable in US dollars.
These stipulations aim to address the risks associated with Bitcoin volatility, which the IMF views as threatening El Salvador’s economic stability.
The Chivo wallet, created by the government to facilitate Bitcoin payments, will be privatized or shut down. This marks a significant shift in the country’s approach to Bitcoin, moving away from government involvement in cryptocurrency services. However, the government has reassured the public that Bitcoin will remain legal tender and private-sector Bitcoin wallets will continue to serve Salvadorans.
This new phase in El Salvador’s Bitcoin journey highlights the country’s delicate balancing act: maintaining Bitcoin’s legal tender status and strategic reserve while adhering to IMF guidelines to ensure fiscal stability. As Bitcoin continues to be a part of the country’s economic strategy, it remains to be seen how these changes will impact the broader adoption of cryptocurrency in El Salvador.
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