El Salvador adjusts Bitcoin policy, making it voluntary for businesses amid the IMF loan deal.
The IMF loan deal prompts El Salvador to reduce Bitcoin involvement and focus on dollar taxes.
Despite IMF pressure, El Salvador continues Bitcoin purchases, holding nearly $602M in BTC.
El Salvador has agreed to adjust its Bitcoin policies as part of a $1.4 billion loan deal with the International Monetary Fund (IMF). The agreement aims to help the country reduce its debt-to-GDP ratio over the next 40 months. The IMF has made it clear that the country’s Bitcoin project poses risks that need to be reduced. This loan deal follows years of negotiations with President Nayib Bukele’s government.
Changes to Bitcoin Policy
El Salvador will make Bitcoin acceptance voluntary for private businesses. This marks a shift from its earlier stance where Bitcoin was used as legal tender. The government will minimize its participation with Bitcoin transactions and services. This will also reduce its backing for the Chivo wallet, a state-sponsored wallet. According to the IMFs regulations, these changes are required to conform to its policies. It should also manage risks of the fluctuation of Bitcoin or any other crypto currency.
The IMF also stated that taxes in El Salvador are now payable in US dollars which is the country’s legal tender. The government’s role in Bitcoin transactions and Bitcoin purchases will be confined. These changes represent a significant rethinking of the country’s Bitcoin strategy.
El Salvador’s Continued Bitcoin Purchases
However, regardless of these changes, El Salvador will keep on purchasing Bitcoin. The country started acquiring Bitcoin in 2021 and now has around 5,968 BTC, which is equal to $602 million. Furthermore, the National Bitcoin Office stated that El Salvador will continue to buy one bitcoin every day. The country is still holding Bitcoin and there are no intentions of selling it. It sees Bitcoin as part of its future plans.
This loan from the IMF will be paid over the 40 months with AED 1.4 billion. Apart from the IMF loan, El Salvador will get more loans from other international financial institutions such as the World Bank. The IMF has continuously urged President Bukele to discontinue using Bitcoin as legal tender. This is due to some risks associated with cryptocurrency. However, the loan deal is seen as a balancing act between the IMF and El Salvador’s government that fully supports Bitcoin.
Public Opinion on Bitcoin Use in El Salvador
Max Keiser, an advisor to President Bukele, opposes the IMF’s position on Bitcoin. He argued that the IMF has no business commenting on El Salvador’s affairs as adoption of bitcoin remains voluntary. Keiser also pointed out that the usage of Bitcoins is still gradually increasing in the country despite the IMF proposals.
Despite this, the latest surveys reveal that the majority of Salvadorans do not utilize Bitcoin in their transactions. Another survey conducted in October revealed that 92% of the participants do not use bitcoins for payment. This is an improvement from an earlier data that revealed that 88% of Salvadorans refrained from using Bitcoin. This implies that though the adoption of the Bitcoin has been responsive to government policy, it has not elicited a public response.
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