🚨 Shocking News for Bitcoin Enthusiasts🚨
El Salvador, the first country to adopt Bitcoin as legal tender, has announced limitations on Bitcoin use at the government level in exchange for a $1.4 billion loan from the International Monetary Fund (IMF) over the next 40 months. This deal will reshape the nation's Bitcoin strategy while strengthening its economic reforms.
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What’s the Deal?
🔸 El Salvador will limit involvement in its national Bitcoin wallet, Chivo, and minimize public sector engagement in Bitcoin-related projects.
🔸 Bitcoin-related economic activity will remain focused on private businesses, keeping the government’s direct involvement minimal.
🔸 The IMF highlighted that this move aims to reduce risks tied to El Salvador's Bitcoin strategy.
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Why This Matters
The IMF has long been skeptical of Bitcoin, citing risks to economic stability. This agreement allows El Salvador to stabilize its debt-to-GDP ratio while ensuring economic reforms.
Experts believe this deal won't derail El Salvador's Bitcoin vision but will refocus it on private sector adoption, which could boost the economy in the long term.
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Bitcoin Price Impact
Following the announcement:
📉 Bitcoin dropped 5% and is now trading at $99,676.
💡 President Nayib Bukele reassured investors by committing to buying 1 Bitcoin daily for the nation, emphasizing long-term confidence in BTC.
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Economic Implications
✅ El Salvador’s debt-to-GDP ratio is expected to drop significantly.
✅ Private sector engagement in Bitcoin could foster innovation and new business opportunities.
✅ The deal may pave the way for El Salvador to attract foreign investments while stabilizing its economy.
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Community Reactions
🌍 Crypto enthusiasts are divided:
Some see this as FUD (Fear, Uncertainty, and Doubt) aimed at Bitcoin.
Others call it a strategic move for El Salvador to secure financial stability while holding onto its Bitcoin dream.
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Key Takeaways
✔️ El Salvador remains committed to Bitcoin adoption, even if government involvement is scaled back.
✔️ The $1.4 billion loan from the IMF is a short-term boost for economic stability.
✔️ Bitcoin's long-term outlook remains strong, driven by private sector innovation and continued accumulation by El Salvador.
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#Bitcoin #IMF #ElSalvador #CryptoNews

In an unexpected twist, El Salvador, a pioneering country in adopting Bitcoin, has agreed to limit its involvement with the cryptocurrency at the government level, in a move that shocked the crypto world! 🪙🔻
On December 18, 2024, the IMF and El Salvador reached a staff-level agreement for a $1.4 billion loan deal that will reshape the country's Bitcoin strategy. 🇸🇻 The agreement calls for reducing the government's focus on the national Bitcoin wallet Chivo, shifting responsibility to crypto-focused businesses instead of public sector initiatives. The IMF aims to significantly diminish the risks tied to Bitcoin, with private sector acceptance to become voluntary. 📉
This decision has caused Bitcoin prices to tumble by 5% in just hours, with the current trade price of Bitcoin dipping to $99,676. 💥 The market is reacting with caution, but the President of El Salvador has reassured investors, reaffirming the country's commitment to stacking 1 Bitcoin every day! 📈
Despite the backlash, economic experts believe this could benefit El Salvador’s economy in the long run, as the country stands to reduce its debt-to-GDP ratio and stabilize its finances. But, the question remains – is this the end of El Salvador’s Bitcoin dream, or is it just a new chapter? 🤔
Stay tuned as this high-stakes financial drama continues to unfold! 🌍💥
#ElSalvador #IMF #CryptoNewss #BTC☀

A very shocking news coming for the Bitcoin sector because of a deal between Bitcoin bull country El Salvador & Bitcoin hater IMF.

The International Monetary Fund (IMF) is an international financial institution. This institution provides financial assistance and policy advice to member countries to help them to fight against payment problems, typically due to economic instability, high inflation, or unsustainable debt levels. Also, the IMF provides loans to countries in need of financial support to stabilize their economies but with certain conditions, for example, restructuring the country’s economy.

On 18 Dec 2024, The IMF body published the latest details about a loan deal with Central American country El Salvador.As per the deal conditions, El Salvador limits its involvement in the country’s national digital Bitcoin wallet, “Chivo”, and also leaves the Bitcoin-related development focus on public sector engagement. That means Bitcoin-related economic activity will remain highly confined to crypto-focused businesses instead of the government authorities.By following the deal precisely, El Salvador will get $1.4 billion from the IMF over the next 40 months.

The IMF and the EL Salvador government have reached a staff-level agreement on a 40-month EFF arrangement to support the government's economic reforms. The agreement with 🇸🇻 is subject to approval by the IMF Executive Board. https://t.co/1GLjFsEhVl pic.twitter.com/M1U77Flz4f

— IMF (@IMFNews) December 18, 2024

The IMF body stated that “The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies. Legal reforms will make acceptance of Bitcoin by the private sector voluntary”.

Many economic experts noted that such deals are not going to impact El Salvador’s Bitcoin vision and it is going to give a better boost to the country’s economy. With this deal, El Salvador’s debt-to-GDP ratio will drop significantly, which is a very good sign for the economy of this country.

Bitcoin price action

Following this news, the trade price of Bitcoin crashed 5% within the last couple of hours. The current trade price of Bitcoin is $99,676.

The current trade price of Bitcoin is $99,673 pic.twitter.com/GUmfYKNz3A

— Bitcoinik (@Bitcoinikdotcom) December 19, 2024

To control the panic level among the Bitcoin investors, the El Salvador president confirmed that his country will keep buying 1 BTC every day.

El Salvador keeps stacking 1 BTC per day, every day. 🇸🇻🏆🚀 pic.twitter.com/6gevIr1j4A

— The Bitcoin Office (@bitcoinofficesv) December 18, 2024

Read also: WazirX announces the re-opening of crypto trading services!

El Salvador has reached a staff-level agreement with the International Monetary Fund (IMF) for a $1.4 billion Extended Fund Facility (EFF) arrangement.

The 40-month deal aims to address the country’s fiscal challenges while supporting economic reforms and long-term growth.

El Salvador’s IMF Deal Includes Bitcoin, Tax, and Fiscal Reforms

As part of the agreement, El Salvador will amend its Bitcoin Law to make Bitcoin acceptance voluntary rather than mandatory for merchants. Taxes will be payable exclusively in US dollars, and the government plans to reduce its involvement with the state wallet, Chivo.

“The IMF basically went from, “remove the Bitcoin Law or else,” to “make the use of your already optional currency officially optional and wind down your app that nobody likes anyway.” El Salvador made the IMF surrender to its Bitcoin Law,” commented one user.

These adjustments reflect efforts to address IMF concerns about Bitcoin’s volatility and risks.

The country also committed to significant fiscal reforms. It plans to reduce the fiscal deficit by 3.5% points of GDP over three years through spending cuts and tax increases. Additionally, El Salvador aims to increase foreign reserves from $11 billion to $15 billion, ensuring greater financial stability.

The IMF acknowledged the country’s steady economic growth, driven by strong remittances and a boost in tourism. The agreement seeks to enhance public finances, promote sustainable development, and maintain financial stability.

“Bitcoin use in El Salvador was always voluntary and its usage has never been higher and continues to grow. The IMF’s point is dead on arrival. Chivo is one of dozens of wallets used in El Salvador. Its presence or non-presence is meaningless. Again, pay taxes in USD? Yea, whatever dude. Saving rates in Bitcoin and using Bitcoin as collateral to buy property is exploding higher in ES. El Salvador’s success is due to Bitcoin, not the failed policies of the IMF,” added Max Keiser.

In securing this arrangement, El Salvador law opens the door to additional loans from other international financial institutions, potentially increasing total financing to over $3.5 billion.

This deal concludes four years of negotiations with the IMF, during which Bitcoin’s role in the economy was a key concern. The IMF’s Executive Board is expected to review and approve the agreement in the coming weeks. This development represents a critical step for El Salvador as it balances economic modernization with financial stability.

Facing the default, El Salvador has reportedly agreed on a deal with the IMF that was worth $1,4 bln and which brought some changes to its experimental cryptocurrency policies. According to this arrangement, the use of Bitcoins will be optional in private areas, while the government’s interference with the cryptocurrencies will be reduced.

It is a step that joins a set of measures aimed at trying to overcome the economic crisis and lower the public debt that has reached 85 percent of GDP. This is a significant stride in the direction of fiscal integration and presupposes the stimulation and establishment of following financial assistance in the scale of $3.5 bn from the World Bank and regional development banks.

IMF Agreement Signals Change in Bitcoin Policy 

The elements of the $ 1.4 bln deal include actions aimed at increasing El Salvador’s fiscal strength to enhance the country’s primary balance by 3.5 % in three years. This comes after several months of taking time to work out the details of the IMF and the Salvador Government.

A peculiar feature of the deal is the change in the status of Bitcoin in the national economy. As Bitcoin is still legal tender in the country, the uptake for it by the private sector will now be purely a matter of choice. This policy change has been appreciated by the international communities and financial institutions.

El Salvador

“Exempting the use of Bitcoin as voluntary is the middle of the road policy, which means allowing liberalization while avoiding putting the business or anyone into unknown territory,” said IMF’s Caroline Masters on Thursday.

Furthermore, the government has declared that taxes would be paid in US dollars only, and the use and acceptance of Bitcoin would be formally shunned in the country’s public sector. The Chivo e-wallet, backed by the state and praised as a way to promote the use of Bitcoin, will also gradually shrink its activities.

Bitcoin’s Declining Market Value 

This means that a significant plummet followed the announcement of the IMF deal in the Bitcoin price. The cryptocurrency is trading at around $105,000 after it pushed through $100,000 and even touched $108,000. S&P Citi analysts partly blame this decline on the U.S. Federal Reserve’s policy on interest rates, which has made risk-sensitive assets contractionary globally.

El Salvador

This market volatility has supported the Salvadoran government’s decision to limit the use of Bitcoin, particularly in the public sector. Nevertheless, economic challenges were observed in 2012 mainly due to the global crisis, but El Salvador can count on remittances, increased tourism flow, and a better security situation.

“The new agreement with the IMF and the willingness of the country to push through with economic reform are strong signals of its willingness to open up more for foreign direct investment,” said David Gomez, an economist with the Latin American Institute for Financial Studies.

 More Sources of Funding on the Way 

Apart from the IMF loan, El Salvador is to get $3,5 billion in extra funding from the World Bank and the regional development banks. These funds will go to the development of infrastructure, social services, and other changes spelt out under the IMF deal.

For self-finance, the Salvadoran government has also stressed its efforts on fiscal discipline. Through cases of decreased spending in public projects and enhanced efficiency in tax collection, officials hope to achieve more employment of debts.

The IMF deal is a plus for El Salvador and its efforts in overcoming challenges resulting from its previous experience with Bitcoin. The voluntary adoption model might be a benchmark to be followed by other nations who are likely to adopt cryptocurrencies in the future.

Looking Ahead 

As in most of the Central American nations, El Salvador’s IMF cooperation is anticipated to open a new chapter of macroeconomic stability and enhanced growth. Thus, the nation is set on the right course to integrate innovation with the fiscals so as to create a sustainable future base.

Though some people have reacted angrily about making the acceptance of Bitcoin voluntary, it fits into a global trend of tentative embrace of the technology. Realizing that the Salvadoran economy has faced some challenges, more money from international organizations should help El Salvador to withstand the blows.  Keep following The Bit Journal and keep an eye on crypto news and developments.

FAQs

What prompted El Salvador to make legal tender acceptance of Bitcoin optional?

This was in a $1.4 billion deal with the IMF in a bid to calm the troubled domestic economy. The voluntary model of integration seeks equal adoption and innovation but without putting pressure on users and businesses to adopt Bitcoin.

Will Bitcoin remain legal tender in El Salvador?

Yes, Bitcoin is still legal tender, but the use has been made to be optional in the private sector only. There is a decrease of public sector participation through the acceptance of taxes in United States dollars only.

What other conditions are contained in the IMF agreement?

This agreement establishes fiscal reforms that aim for an enhanced primary balance of at least 3.5% over the next three years, lower public debt and extra funds of $3.5 billion from the World Bank and regional banks.

How about Bitcoin’s price as a result of this news?

Bitcoin has now dipped to slightly over $100,000 after breaching an ATH of around $108,000. Most of the decrease is due to general market factors and, more specifically, the US Federal Reserve policy with respect to interest rates.

What is the future of the Chivo e-wallet supported by the state?

Chivo e-wallet, which was launched to support the usage of Bitcoin, will slowly be shut down as the government decreases the influence of the public sector on cryptocurrencies.

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El Salvador is in the process of securing a $3.5 billion deal with the International Monetary Fund, but is making some concessions around bitcoin (BTC) to get the funding.

Stacey Herbert, director of the Bitcoin Office in El Salvador, posted on Thursday that the government-issued Chivo wallet — launched in 2021 in a bid to spread bitcoin adoption across the country — will be "sold off or wound down" as part of the deal. Other bitcoin wallets operated by private companies will "continue serving El Salvador," Herbert said.

The IMF stated on Wednesday that, under the agreement, El Salvador will also make bitcoin acceptance by the private sector voluntary, and that taxes will only be paid in U.S. dollars (not bitcoin). "For the public sector, engagement in bitcoin-related economic activities and transactions in and purchases of bitcoin will be confined," the document also said, without going into further detail.

Herbert, however, wrote in her post that El Salvador will continue to add bitcoin to its reserves — possibly, even, at an "accelerated pace." The Central American nation is currently buying one bitcoin per day; at press time, it held 5,968.77 bitcoin, worth almost $596 million. Herbert said that many of El Salvador's bitcoin-related projects, including the development of bitcoin capital markets and the offering of bitcoin educational programs, will continue to occur. The cryptocurrency's legal tender status will likewise not be impacted.

The IMF has had misgivings about El Salvador's bitcoin initiatives ever since President Nayib Bukele made bitcoin legal tender in the country in September 2021, giving it the same status as the U.S. dollar, the nation’s official currency. In 2022, the agency warned that El Salvador was incurring "large risks associated with using Bitcoin as legal tender, especially given the high volatility of its price."

"The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies," the IMF stated on Wednesday.

Salvadorans were offered $30 in bitcoin to sign up on Chivo, but national adoption never really took off. By mid-2022, more than 60% of recipients had yet to make a transaction, according to the National Bureau of Economic Research. A survey from the Central American University found in January that 88% of surveyed Salvadorans hadn't used bitcoin in 2023.

The IMF itself will only provide $1.4 billion as part of the deal with El Salvador. Funds from the World Bank, the Inter-American Development Bank and regional development banks are expected to bring the total amount to $3.5 billion as part of the same program.

El Salvador eases Bitcoin policies under a massive $1.4 billion loan deal with the IMF. 

The agreement allows businesses to choose whether to accept Bitcoin as payment.

The IMF also suggests the government reduce its involvement in the Chivo crypto wallet.

El Salvador’s ambitious Bitcoin policies may be left unrealized as the country enters into a massive $1.4 billion loan deal with the International Monetary Fund (IMF). Citing inherent risks associated with Bitcoin adoption, the IMF recommended that businesses in El Salvador be given the freedom to choose whether to accept Bitcoin as payment. The agreement, if approved, would mandate the government to reduce its involvement in the Chivo crypto wallet.

Elaborating on the potential changes in El Salvador’s controversial Bitcoin policies, the regulator cited, 

The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies…Legal reforms will make acceptance of Bitcoin by the private sector voluntary. For the public sector, engagement in Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined.

El Salvador, being the first nation to adopt Bitcoin as a legal tender, has gained widespread attention and criticism. The global monetary watchdog has long been warning the country and President Nayib Bukele against the crypto-related risks. Pointing out Bitcoin’s speculative nature, the IMF advised the country to restrict the government’s exposure to the cryptocurrency. 

They cautioned, “Given the legal risks, fiscal fragility, and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to Bitcoin, including by issuing tokenized bonds.” 

El Salvador Teams Up with Argentina to Lead Crypto Market

After prolonged negotiations, El Salvador has decided to ease its Bitcoin policies under the new agreement with the IMF. As per the agreement dated December 18, the IMF would provide $1.4 billion over the next 40 months. In response, the country would implement measures to reduce its debt-to-GDP ratio. However, the agreement still needs the approval of the IMF Executive Board. 

Since 2021, El Salvador has been aggressively accumulating Bitcoin, becoming one of the largest BTC holders. According to data released by El Salvador’s National Bitcoin Office, the country currently holds 5,968.8 Bitcoin, worth about $602 million. Despite the recent development, a National Bitcoin Office spokesperson revealed the country’s decision to continue purchasing the crypto. 

The post IMF’s $1.4B Deal Revamps El Salvador’s Bitcoin Policies  appeared first on CryptoTale.

El Salvador has successfully secured a $1.4 billion loan from the International Monetary Fund (IMF), finalizing a deal that had…

For the full story, head over to TheCurrencyAnalytics.com.

El Salvador has reached an agreement with the International Monetary Fund (IMF) for a loan of 1.4 billion dollars, which will be disbursed over the next 40 months under the Extended Fund Facility (EFF). 

The agreement aims to support the government’s economic reforms, but includes restrictive measures on activities related to Bitcoin, the cryptocurrency adopted in 2021 as legal tender.

Bitcoin and the “potential risks” according to the IMF loan for El Salvador

In the official statement, the IMF emphasized that the loan will help reduce the risks associated with the country’s Bitcoin project. Among the main provisions, the acceptance of Bitcoin in the private sector will be made voluntary, removing the obligation for companies to accept the cryptocurrency as a method of payment.

Furthermore, the government will limit its involvement in transactions related to Bitcoin and will gradually reduce its participation in the Chivo cryptocurrency portfolio, an initiative launched to promote the adoption of Bitcoin at the national level.

The taxes, based on the new agreement, can be paid exclusively in US dollars, confirming a transition towards greater currency stability.

The agreement with the IMF represents only a part of the overall financial package that El Salvador will receive. The government is negotiating additional funding with other international banking institutions, for a total exceeding 3.5 billion dollars. These funds will be used to strengthen public finances and support economic development projects.

The criticisms of the cost of IMF assistance

Despite the potential benefits, the decision of El Salvador has raised doubts and criticisms. A well-known podcaster specialized in Bitcoin has questioned the real cost of the financial assistance from the IMF. 

According to this perspective, the loan could represent a significant compromise, forcing the government to scale down one of its most ambitious projects: the adoption of Bitcoin as a tool to promote financial inclusion and attract foreign investments.

The same IMF policy, perceived as contrary to criptovalute, could hinder the financial innovation that El Salvador has sought to lead in recent years.

The adoption of Bitcoin by El Salvador has attracted global attention and sparked controversy since its announcement. Although the government has promoted the cryptocurrency as a tool to enhance access to financial services and stimulate economic growth, the results have been controversial so far. The volatile value of Bitcoin has exposed the country to significant financial risks, fueling concerns from organizations like the IMF.

With the new agreement, the role of Bitcoin in the economy of El Salvador seems set to diminish, at least in the short term. However, the government might continue to pursue innovative policies in the cryptocurrency sector, seeking a balance between macroeconomic stability and technological experimentation.

“`html Conclusions “`

The agreement between El Salvador and the IMF marks a crucial moment for the Central American country. Although the $1.4 billion loan provides essential support for public finances, the restrictions imposed on Bitcoin represent a step back for one of the government’s most audacious projects. 

It remains to be seen if this compromise will succeed in balancing the needs of economic stability with the ambition to position El Salvador as a leader in the adoption of cryptocurrencies.

El Salvador has agreed with the IMF to scale back bitcoin activities for a $1.4 billion loan.

Additional funding could push the total financing package above $3.5 billion.

El Salvador, the first country to adopt Bitcoin as a legal tender, agrees to limit Bitcoin-related activities in exchange for a $1.4 billion loan from the International Monetary Fund (IMF). 

Recently, El Salvador obtained a staff-level agreement with the IMF for a 40-month Extended Fund Facility (EFF) arrangement, to support the government’s economic reforms. The agreement approval is subjected to the IMF’s Executive Board. 

As per the agreement, El Salvador has to agree that the businesses will no longer accept Bitcoin, and the government’s participation in Bitcoin-related activities, including the Chivo e-wallet, to be limited. Moreover, the tax payments will be in U.S. dollars. 

This reflects a notable policy change, which balances the government’s initial interest in Bitcoin with the IMF‘s concerns about financial stability. Besides, the agreement also aims to stabilize El Salvador’s economy, such as rising public debt and inflation. 

While the IMF’s approval is pending, it’s expected to bring additional funding. It will potentially bring the total financing package to over $3.5 billion.

International Monetary Fund stated,

“The program is also expected to catalyze additional financial support from the World Bank, the Inter-American Development Bank, and other regional development banks (Central American Bank for Economic Integration, CABEI, Development Bank of Latin America and the Caribbean, CAF) for a combined overall financing package of over US$ 3.5 billion over the program period.”

Furthermore, in September 2021, El Salvador became the first country to adopt Bitcoin as legal tender. President Nayib Bukele’s administration has promoted cryptocurrency to support financial inclusion and draw investment. However, it has faced challenges like the volatility of Bitcoin and the limited adoption among citizens.

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IMF spokesperson Kozak has declined to comment on former President Donald Trump's proposed U.S. strategic Bitcoin reserve plan. Kozak stated that the International Monetary Fund would conduct a comprehensive assessment of the policy only if and when it is implemented. 

According to Foresight News, the Director of El Salvador's Bitcoin Office has announced that the country's official Bitcoin wallet, Chivo, may be sold or discontinued following an agreement with the International Monetary Fund (IMF). This development marks a significant shift in El Salvador's approach to its Bitcoin initiative, which has been a focal point of the country's economic strategy since it became the first nation to adopt Bitcoin as legal tender.

The decision to potentially sell or discontinue the Chivo wallet comes amid ongoing discussions with the IMF, which has expressed concerns about the risks associated with Bitcoin's volatility and its impact on financial stability. The Chivo wallet was launched to facilitate Bitcoin transactions for Salvadorans, offering a user-friendly platform for both domestic and international transactions. However, its future now hangs in the balance as the government evaluates its options in light of the IMF's recommendations.

El Salvador's adoption of Bitcoin has been a controversial move, drawing both praise and criticism from various quarters. Proponents argue that it could boost financial inclusion and attract foreign investment, while critics warn of potential economic instability and the challenges of integrating a decentralized digital currency into a national economy. The potential sale or discontinuation of the Chivo wallet could signal a recalibration of El Salvador's Bitcoin strategy as it seeks to balance innovation with economic prudence.

After agreeing to curtail its ambitious Bitcoin initiatives, El Salvador has reached a $1.4 billion loan arrangement with the International Monetary Fund (IMF).

The agreement, which needs the approval of the IMF Executive Board, aims to support El Salvador’s reform agenda, boost fiscal and external sustainability, and create conditions for stronger, inclusive growth.

IMF Loan Agreement with El Salvador

According to the official press release, the program is expected to catalyze additional financial support from the World Bank and regional development banks, bringing the total financing package to over $3.5 billion during the program period.

As part of El Salvador’s $1.4 billion deal with the IMF, the government has agreed to scale back its ambitious Bitcoin policies to address financial stability concerns. Legal reforms will make Bitcoin usage optional for private businesses, removing the mandate that had been in place since the cryptocurrency was adopted as legal tender in 2021.

Meanwhile, for the public sector, Bitcoin-related activities will be strictly limited, with the government no longer accepting BTC for tax payments. Additionally, the state-run Chivo wallet, which facilitated Bitcoin transactions for citizens, will see its government involvement gradually phased out. These measures are intended to mitigate risks associated with Bitcoin’s volatility and safeguard financial integrity, as per IMF’s statement.

The program also includes improved transparency, regulation, and oversight of digital assets to protect consumers and investors while maintaining financial stability. By taking a step back from its cryptocurrency experiment, the Salvadoran government aims to rebuild confidence in its broader fiscal policies and align with IMF recommendations, a move expected to attract further international financial support and stabilize the economy.

“IMF staff thank the Salvadorean authorities for the excellent collaboration and candid dialogue over the past months in the development of their economic reform program aimed at continuing to improve the prosperity of El Salvador and all of its people.”

Criticisms

President Nayib Bukele has staunchly advocated for Bitcoin as a key part of his administration’s economic strategy, investing heavily in the cryptocurrency to promote financial autonomy. Despite Bitcoin’s recent surge above $100,000, yielding a whopping 123.67% return on the government’s $269.7 million investment, the IMF’s conditions have compelled El Salvador to alter its BTC strategy.

Critics argued that Bukele has now surrendered to the demands of global financial powers. As one financial analyst noted, Bukele’s decision to take a $3.5 billion loan from the IMF has led to accusations of selling out, calling it an ironic shift for someone who once criticized fiat currency.

The post El Salvador’s $1.4 Billion IMF Deal Harms its Bitcoin Adoption appeared first on CryptoPotato.

El Salvador is set to ease its Bitcoin usage mandate as part of a $1.4 billion loan agreement with the International Monetary Fund (IMF). The reforms include making Bitcoin acceptance voluntary for merchants, reducing government involvement in the Chivo wallet, and limiting public sector participation in Bitcoin-related transactions.

The IMF, which has been critical of El Salvador’s embrace of Bitcoin, welcomed these policy adjustments, stating they would significantly reduce the risks associated with the country’s Bitcoin initiatives.

Reforming El Salvador’s Bitcoin Policies

In 2021, El Salvador became the first country to adopt Bitcoin as legal tender under President Nayib Bukele’s leadership. While the move aimed to boost financial inclusion and attract investment, it has drawn criticism from institutions like the IMF due to concerns over volatility and speculative risks.

Key Changes Under the IMF Loan Deal:

Voluntary Bitcoin Acceptance: Merchants will no longer be required to accept Bitcoin, marking a significant shift from the original mandate.

Chivo Wallet Rollback: The government plans to scale back its involvement in the state-run Chivo wallet, which was designed to facilitate Bitcoin transactions.

Reduced Public Sector Role: Public entities will be restricted from engaging in Bitcoin transactions or holding Bitcoin in their reserves.

These measures align with the IMF’s recommendations to minimize cryptocurrency-related risks while maintaining some aspects of Bitcoin’s integration.

IMF’s Stance on El Salvador’s Bitcoin Adoption

The IMF has consistently expressed concerns about El Salvador’s Bitcoin policy, citing:

Economic Risks: Bitcoin’s price volatility could destabilize the country’s financial system.

Fiscal Strain: Public investments in Bitcoin could divert resources from critical social and economic programs.

Speculative Nature: The IMF has warned against using cryptocurrency as a core financial instrument due to its speculative nature.

With the new reforms, the IMF expects El Salvador to mitigate these risks while still exploring the potential benefits of blockchain technology.

Impacts on the Chivo Wallet

The Chivo wallet, launched alongside El Salvador’s Bitcoin law, was designed to facilitate digital payments and remittances. However, its rollout faced challenges, including:

Technical Issues: Users reported glitches and security vulnerabilities.

Low Adoption Rates: Despite government incentives, the wallet has seen limited use among the population.

Under the new agreement, the government will reduce its involvement in Chivo, allowing the private sector to play a larger role in managing digital payment solutions.

Economic Implications of the Reforms

For the Private Sector:

Flexibility: Businesses will have the option to accept Bitcoin based on their preferences, potentially easing operational pressures.

Regulatory Clarity: Legal reforms will provide clear guidelines, fostering a more stable business environment.

For the Public Sector:

Risk Reduction: Limiting public sector engagement in Bitcoin transactions will shield government finances from cryptocurrency volatility.

Focus on Core Priorities: The reforms may enable the government to reallocate resources toward critical infrastructure and social programs.

El Salvador’s Bitcoin Journey: A Mixed Legacy

El Salvador’s Bitcoin adoption has had its share of highs and lows:

Achievements:

Increased global visibility and investment interest.

Promoted financial inclusion through digital wallets.

Challenges:

Criticism over mandatory Bitcoin acceptance.

Concerns about the fiscal impact of Bitcoin purchases.

The IMF-backed reforms signal a more measured approach, balancing the potential benefits of cryptocurrency with the need for economic stability.

FAQs

What changes are being made to El Salvador’s Bitcoin mandate? The government will make Bitcoin acceptance voluntary for merchants, reduce its role in the Chivo wallet, and limit public sector Bitcoin transactions.

Why is El Salvador changing its Bitcoin policies? The reforms are part of a $1.4 billion loan deal with the IMF, aimed at reducing economic risks associated with Bitcoin adoption.

What is the IMF’s position on Bitcoin in El Salvador? The IMF has urged El Salvador to scale back its Bitcoin project, citing concerns about volatility, fiscal strain, and speculative risks.

What happens to the Chivo wallet under the new policy? The government will reduce its involvement in the Chivo wallet, potentially handing over management to private sector players.

How will these changes affect businesses in El Salvador? Businesses will no longer be required to accept Bitcoin, giving them greater flexibility in their payment options.

What are the broader implications of these reforms? The reforms aim to balance innovation with economic stability, addressing concerns while retaining some aspects of Bitcoin’s integration.

Conclusion

El Salvador’s decision to ease its Bitcoin usage mandate reflects a pragmatic response to domestic and international concerns. By aligning with the IMF’s recommendations, the country aims to reduce the risks associated with its Bitcoin policies while maintaining its position as a pioneer in cryptocurrency adoption.

The reforms mark a turning point in El Salvador’s Bitcoin experiment, signaling a shift toward a more sustainable and balanced approach.

To learn more about the innovative startups shaping the future of the crypto industry, explore our article on latest news, where we delve into the most promising ventures and their potential to disrupt traditional industries.

El Salvador secured a $1.4 billion IMF loan by scaling back Bitcoin policies.  

Bitcoin is no longer mandatory for merchants and restricted to public sector use.  

The government reduces involvement in the Chivo wallet amid financial transparency reforms. 

El Salvador will scale back its Bitcoin policies to secure a $1.4 billion loan from the International Monetary Fund (IMF). Sources say the deal includes fiscal measures and expects $3.5 billion in additional financing from the World Bank and regional banks.

JUST IN: El Salvador secures $3.5 billion IMF financing package after agreeing to make accepting #Bitcoin voluntary and unwind its Chivo wallet. pic.twitter.com/54l9kpDNQL

— Bitcoin Magazine (@BitcoinMagazine) December 18, 2024

Read also: Bitget Secures BSP License in El Salvador to Expand Bitcoin Services

Also, the reforms will make Bitcoin acceptable to merchants voluntarily, limit public sector Bitcoin-related activities, and reduce the government’s involvement in the Chivo wallet. The move reverses President Nayib Bukele’s 2021 initiative, raising questions about Bitcoin’s role in national economies.

Beyond voluntary Bitcoin acceptance, th…

The post El Salvador Scales Back Bitcoin Adoption Under IMF Loan Terms appeared first on Coin Edition.

Coinspeaker El Salvador Plans Faster Bitcoin Accumulation Despite IMF Agreement

El Salvador announced on Thursday its intention to continue its Bitcoin acquisition strategy, potentially at a faster rate, a day after securing a financing agreement with the International Monetary Fund (IMF). The announcement directly contrasts with the IMF’s recommendation to limit the country’s cryptocurrency exposure.

The director of the Bitcoin Office in El Salvador, Stacey Herbert, posted on her X page that Bitcoin remains legal tender in the country and that the government will continue acquiring the digital currency at a significant pace for its strategic reserve.

🇸🇻EL SALVADOR SECURES $3.5 FUNDING DEAL

➡️Bitcoin remains legal tender➡️El Salvador will continue buying bitcoin (at possibly an accelerated pace) for its Strategic Bitcoin Reserve➡️Bitcoin capital markets will continue to be built; for example, the recent tokenized issuance…

— Stacy Herbert 🇸🇻🚀 (@stacyherbert) December 19, 2024

El Salvador secured a $1.4 billion loan from the IMF on Wednesday, and as part of the deal, the country’s president, Nayib Bukele, agreed to adjust certain aspects of its Bitcoin policies.

The IMF hasn’t always supported El Salvador’s Bitcoin plans since President Nayib Bukele made Bitcoin legal money in September 2021. In 2022, the IMF warned that using Bitcoin as legal money was risky because its price changes a lot.

It was stated in the agreement released by the IMF that acceptance of Bitcoin by the private sector will only be voluntary, and taxes will only be paid in US dollars. In contrast, public sector engagement with Bitcoin will be restricted. The government’s role in the Chivo e-wallet to promote Bitcoin adoption will be gradually reduced.

“For the public sector, engagement in Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined. Taxes will only be paid in US dollars and the government’s participation in the crypto e-wallet (Chivo) will be gradually unwound.”according to the agreement.

El Salvador Stands Firm Despite Restrictions

However, despite the restrictions made in the agreement, the country remains undaunted in its Bitcoin policy. It currently holds nearly 6,000 bitcoins, valued at around $596 million. The director of the Bitcoin Office in El Salvador, Stacey Herbert, posted on her X page that Bitcoin remains legal tender in the country and that it will continue purchasing the digital currency at a very high pace for its strategic reserve.

Stacey further mentioned that efforts to develop the Bitcoin capital market will not stop, such as initiatives like the recent tokenized issuance of US Treasuries on Liquid through NexBridgeSV.

“Bitcoin capital markets will continue to be built; for example, the recent tokenized issuance of US Treasuries on Liquid via NexBridgeSV and so much more will be announced soon regarding capital markets on Bitcoin.” Stacey noted.

The head of trading and structured products for North America at Moneycorp, Eugene Epstein, commented on El Salvador’s announcement of buying more Bitcoin, suggesting it could be a response to negative reactions regarding the digital asset’s decreasing importance in the country. Eugene added that, given the size and terms of the IMF deal, it made sense for President Bukele to take this step.

Stacey further stated in her post that her office will continue developing Bitcoin policies and creating plans while attracting investors and building educational programs. One of the educational initiatives is the Little HODLer Bitcoin and Money Workbooks for Grades 2 and 3, set for January 2025. Additionally, CUBO+ will continue training top-tier Bitcoin and Lightning developers in the country, with another group of over 20 students graduating at the end of January 2025.

She also mentioned that Mi Primer Bitcoin and Node Nation will continue to be taught in high schools across El Salvador.

El Salvador is adjusting its Bitcoin policy to meet IMF conditions, including limiting government involvement in crypto services. The government-run Chivo wallet will either be sold or phased out, but private Bitcoin wallets will remain operational. Despite IMF restrictions, El Salvador remains committed to developing Bitcoin capital markets and educational initiatives.

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El Salvador Plans Faster Bitcoin Accumulation Despite IMF Agreement

El Salvador has agreed to shift its Bitcoin strategy following a $1.4 billion loan agreement with the International Monetary Fund (IMF). As part of the deal, the country will make Bitcoin acceptance voluntary for merchants and restrict public sector involvement in Bitcoin-related activities.

Voluntary Bitcoin Acceptance for Merchants

These steps are aimed at easing the country’s debt burden while minimizing potential risks linked to Bitcoin’s volatility. The IMF has long been skeptical of El Salvador’s decision to adopt Bitcoin as legal tender, highlighting the risks associated with its speculative nature.

Under the new agreement, El Salvador will gradually unwind its involvement with Chivo, the state-backed cryptocurrency wallet. While the government’s role in Bitcoin-related transactions will be confined, the country will continue to accumulate Bitcoin. A National Bitcoin Office spokesperson confirmed that El Salvador plans to keep buying one Bitcoin per day, with no plans to sell its existing holdings. Currently, El Salvador holds around 5,969 BTC, worth approximately $602 million. Despite the shift in policy, the country’s commitment to Bitcoin remains a central part of its long-term economic strategy.

Negotiations with IMF

This change comes after a series of negotiations with the IMF, which have lasted four years. The IMF’s concerns over the country’s Bitcoin adoption have been well-documented, with the global lender fearing that the cryptocurrency’s speculative nature could expose the nation to financial instability.

As part of the new loan agreement, El Salvador is expected to focus on stabilizing its economy, which includes a reduction in its debt-to-GDP ratio. The $1.4 billion loan will be distributed over 40 months and is part of a broader financial package that will also involve additional support from other international banks, including the World Bank.

Despite the IMF’s push for a reevaluation of Bitcoin’s role in El Salvador’s economy, Bitcoin advocate and advisor Max Keiser dismissed the criticism. He argued that Bitcoin’s adoption in El Salvador had always been voluntary and that its usage continues to grow. In contrast, a recent survey revealed that the majority of Salvadorans—92%—do not use Bitcoin for transactions, further highlighting the challenges of widespread adoption.

El Salvador’s Bitcoin experiment, which started in 2021, remains a controversial topic, but with the IMF deal in place, the country’s financial strategy appears to be evolving to ensure its long-term economic stability.

The post El Salvador to Scale Back Bitcoin Adoption in Exchange for $1.4 Billion IMF Loan appeared first on TheCoinrise.com.

The International Monetary Fund (IMF) is evaluating the potential implications of the Trump administration considering Bitcoin as a strategic reserve asset, according to IMF Spokesperson Julie Kozak. Kozak stated that the IMF will conduct a thorough assessment of the proposal's feasibility and potential impact on global financial stability. The move by the Trump administration to consider Bitcoin as a strategic reserve asset has sparked mixed reactions from economists and financial experts. Some argue that it could provide stability to the global financial system, while others caution against the potential risks associated with cryptocurrencies. The IMF's evaluation will aim to address these concerns and provide guidance to policymakers.