The End of the Bitcoin Revolution in El Salvador
The Bitcoin revolution in El Salvador is over. This development serves as a warning to developing nations seeking economic autonomy by making cryptocurrencies legal tender.
The International Monetary Fund (IMF) plays a crucial role in shaping the economic policies of nations, particularly those dependent on development loans. In El Salvadorâs case, President Nayib Bukele abandoned his plan to use Bitcoin as legal tender in exchange for international financial support.
The new reality is clear: countries may hold Bitcoin as a reserve asset, but citizens cannot use it as official currency. Instead, they must remain tied to fiat money.
IMF Says No to Bitcoin as Legal Tender
In 2021, El Salvador became the first country to adopt Bitcoin as legal tender. President Bukele initially promoted the move as a way to free Salvadorans from the constraints of central banking.
However, Bitcoin adoption was slower than expected. Bukele later admitted that it was his governmentâs least popular measure. A 2023 survey revealed that 92% of Salvadorans did not use Bitcoin.
Due to economic pressure, El Salvador was forced to scale back its Bitcoin policy to secure a $1.4 billion IMF loan. This required:
Eliminating the requirement for businesses to accept Bitcoin.Reducing government Bitcoin purchases.Ending the ability to pay taxes in Bitcoin.
As part of the agreement, El Salvador will also phase out government support for the Chivo Bitcoin wallet. The plan is to either privatize or shut down Chivo.
What Remains of El Salvadorâs Bitcoin Strategy?
The Salvadoran government claims it remains committed to Bitcoin, but promoting its use among citizens is no longer a priority. Instead, El Salvador continues accumulating Bitcoin as a reserve asset, as evidenced by its recent purchase of 12 BTC.
Stacy Herbert, director of El Salvadorâs National Bitcoin Office, confirmed that the country will continue building its Bitcoin reserves, but it will no longer prioritize making Bitcoin a mainstream currency for everyday use.
IMF vs. Bitcoin: Who Controls the Financial System?
Bitcoin was supposed to empower ordinary Salvadorans by providing access to a decentralized financial system. The IMF, however, strongly opposes this vision.
The organization imposed conditions to limit public sector involvement in Bitcoin transactions, including:
Restricting government Bitcoin purchases and use.Increasing regulations and oversight of digital assets.Ensuring financial stability and investor protection.
When El Salvador adopted Bitcoin as legal tender in 2021, the IMF warned of financial and legal risks. These risks never materialized, yet the IMF continued pressuring the government to abandon its Bitcoin policy.
El Salvador Under Pressure from the Global Financial System
For decades, the IMF has used its financial power to control the economies of developing nations.
In 2024, mass protests erupted in Kenya against IMF-imposed austerity measures, highlighting the organizationâs exploitative financial practices. Protesters demanded the repeal of IMF-backed tax hikes, which had worsened economic conditions.
Economist Fadhel Kaboub described the IMFâs policies as a form of "neo-colonial wealth extraction", designed to keep developing nations dependent on loans and prevent them from exploring alternative economic models like Bitcoin.
While African nations are resisting IMF control, Bukele has surrendered. He accepted the IMFâs demands, effectively ending El Salvadorâs Bitcoin experiment as legal tender.
The Takeaway from El Salvador
The IMF maintains its dominance in the global financial system by preventing nations from fully transitioning to cryptocurrencies. Bitcoin may serve as a reserve asset for countries, but IMF development aid remains conditional on rejecting Bitcoin as legal tender.
El Salvadorâs case demonstrates that while nations may strive for economic sovereignty, the influence of global institutions remains powerful. The Bitcoin revolution in El Salvador has collided with the harsh reality of the international financial order. đ
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