El Salvador is expected to shift to accepting Bitcoin as a voluntary option for businesses, while gradually reducing state intervention in the little-used Chivo e-wallet. The government will also limit the role of the public sector in economic activities related to Bitcoin. These changes are part of a $1.4 billion loan agreement with the International Monetary Fund (IMF).
According to a December 18 announcement from the IMF, this Central American country will receive a $1.4 billion loan over the next 40 months, after agreeing to implement measures to reduce the debt-to-GDP ratio.
"The potential risks from the Bitcoin project will be significantly mitigated in accordance with IMF policies. Legal reforms will ensure that the acceptance of Bitcoin in the private sector is entirely voluntary," the IMF emphasized. "For the public sector, participation in economic activities related to Bitcoin, including trading and buying, will be limited to a minimum."
El Salvador began purchasing Bitcoin in 2021. According to data from the National Bitcoin Office, the country currently holds 5,968.8 Bitcoin, worth about $603 million.
Additionally, the IMF stated that tax collection will only be conducted in USD, the official currency of El Salvador, and the government's role in operating the Chivo e-wallet will be gradually reduced.
This agreement still requires approval from the IMF Executive Board, but it marks a turning point after four years of difficult negotiations. The negotiation process was interrupted by President Nayib Bukele's decision in June 2021, when he made Bitcoin a legal currency, making El Salvador the first country in the world to do so.
The IMF has long urged President Bukele to abandon plans related to Bitcoin, warning that the highly speculative nature of this cryptocurrency could pose significant risks to the national economy.
This agreement also paves the way for additional loans from other global financial institutions, including the World Bank, with a total funding value of over $3.5 billion.
In response to the IMF's announcement, President Bukele's Bitcoin advisor, Max Keiser, criticized the IMF, arguing that this agreement is "just meaningless bureaucracy."
"The use of Bitcoin in El Salvador has never been mandatory, and the level of Bitcoin usage in this country continues to increase."
However, a survey in October this year showed that up to 92% of Salvadorans do not use Bitcoin for daily transactions, up from 88% in 2023.
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