El Salvador has made a bold move by purchasing $1 million worth of Bitcoin just a day after finalizing a $1.4 billion deal with the International Monetary Fund (IMF), which imposes new restrictions on the country’s involvement with cryptocurrency. On December 19, the National Bitcoin Office confirmed that 11 BTC were added to the country’s strategic reserve, taking El Salvador’s total holdings to 5,980.77 BTC, valued at approximately $580 million, based on Bitcoin’s price of $97,000 at the time.
This purchase marks a break from the country’s previously stated plan to buy “one Bitcoin per day,” which was announced by President Nayib Bukele in November 2022. However, National Bitcoin Office Director Stacy Herbert assured in an X post that the country would continue to buy Bitcoin, possibly at an accelerated pace in the future.
IMF Deal Imposes Limits
On December 18, El Salvador struck a landmark agreement with the IMF, securing a $1.4 billion financing deal to be disbursed over the next 40 months. However, this agreement comes with a significant caveat: the IMF has urged El Salvador to limit its Bitcoin dealings.
The IMF’s mandate includes restricting government-led Bitcoin activities, limiting Bitcoin transactions and purchases, and halting the use of Bitcoin for tax payments, which will continue to be collected in US dollars. Additionally, the IMF has required that the government unwind its involvement in the Chivo Wallet, a crypto wallet launched by the Salvadoran government for Bitcoin transactions.
In response to the IMF’s stipulations, a spokesperson for the National Bitcoin Office stated that despite these new conditions, Bitcoin would remain central to the country’s strategy. While the government will scale back its involvement in Bitcoin transactions, it will continue purchasing Bitcoin, with the possibility of increasing the pace of acquisitions.
Bitcoin Status Remains Unchanged
Despite the IMF’s pressure, El Salvador remains steadfast in its commitment to Bitcoin as legal tender. The country made history in September 2021 by becoming the first nation to adopt Bitcoin alongside the US dollar as an official currency. Herbert confirmed that Bitcoin would retain its legal tender status in the country, though the Chivo wallet would be sold or wound down. The private sector, she added, would continue to facilitate Bitcoin transactions.
The deal with the IMF is still pending approval by the IMF Executive Board, marking the culmination of over four years of negotiation. The deal’s approval will likely bring an end to the tension caused by Bukele’s Bitcoin policies, which the IMF had warned could expose El Salvador to significant financial risks.
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