Original Title: (El Salvador plans to cancel the mandatory acceptance of BTC payments by businesses: in exchange for a $3.3 billion loan from the IMF and World Bank)
Original author: DaFi Weaver, BlockTempo
In mid-2021, El Salvador became the first country in the world to adopt Bitcoin (BTC) as legal tender, but the decision faced strong criticism and pressure from the International Monetary Fund (IMF) at the time.
Previously, the El Salvador government hoped to negotiate credit lines from the IMF to address fiscal issues, but negotiations stalled for two years due to the IMF's demand for El Salvador to amend its Bitcoin law, stating that the legal status of Bitcoin was a major obstacle to obtaining credit support.
El Salvador plans to cancel the mandatory acceptance of Bitcoin payments by businesses.
However, according to reports cited by the Financial Times, El Salvador is negotiating with the IMF to take a step back and cancel the legal requirement for businesses to accept Bitcoin as a payment method, allowing businesses to decide for themselves whether to accept Bitcoin payments, in exchange for a $1.3 billion loan from the IMF.
The agreement is expected to be reached in the next two to three weeks. Reports indicate that an IMF delegation has arrived in El Salvador to finalize the details of an agreement with President Bukele's government.
It is worth noting that the agreement with the IMF will also release two additional loans, one from the World Bank for $1 billion and another from the Inter-American Development Bank for $1 billion. Therefore, overall, El Salvador plans to relax the acceptance requirements for Bitcoin and has the opportunity to secure up to $3.3 billion in loans.
To reach an agreement with the IMF, El Salvador also needs to take measures to reduce government deficits. Sources revealed that the El Salvador government plans to reduce the budget deficit by 3.5 percentage points of GDP over the next three years through spending cuts and tax increases. At the same time, the government will implement an anti-corruption bill and increase foreign exchange reserves from $11 billion to $15 billion.
Regarding this news, an IMF spokesperson declined to comment, citing the organization's policy of not discussing ongoing negotiations.
IMF calls for the abandonment of the Bitcoin strategy.
The IMF has always opposed El Salvador's adoption of digital currency, citing risks to financial stability and integrity, frequently urging Bukele's government to stop accepting cryptocurrencies as legal tender.
In October of this year, the IMF again advised El Salvador to reduce Bitcoin-related policies and strengthen the regulatory framework for digital assets. IMF Communications Director Julie Kozack stated at the time:
"We recommend narrowing the scope of the Bitcoin law, strengthening regulation and oversight of the Bitcoin ecosystem, and limiting public sector exposure to Bitcoin."
As early as two years ago, when El Salvador adopted BTC as legal tender, an IMF spokesperson criticized that the country's Bitcoin law would lead to 'overall economic, financial, and legal issues.' The IMF has repeatedly warned that the volatility and potential risks of Bitcoin pose a threat to El Salvador's economic stability, thus requiring a reassessment of related policies.
However, in August of this year, the IMF also stated that many risks associated with El Salvador's Bitcoin experiment 'have not materialized.' While the tone seems to have softened, the statement added that El Salvador needs to minimize the risks associated with adopting Bitcoin as legal tender as much as possible.
El Salvador's Bitcoin holdings are nearly $600 million.
Currently, El Salvador continues to buy one Bitcoin every day, bringing the total Bitcoin holdings to 5,960, worth over $580 million.
As Bitcoin hit the milestone of $100,000, El Salvador's sovereign bonds rebounded from a significant discount to trade close to par. Bukele commented last week on the synchronized rise of bond prices and Bitcoin, stating:
"This is the first time in history that Bitcoin has driven sovereign bonds to rise in traditional markets."
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