El Salvador, the first country in the world to adopt Bitcoin as legal tender, may now have to bow to the International Monetary Fund (IMF) under real pressure.
According to reports from the Financial Times, to meet the IMF's conditions in exchange for a total of 3 billion USD in international loans, El Salvador plans to amend regulations to abolish the requirement for merchants to accept Bitcoin payments.
IMF pressure, Bitcoin law compromise?
In 2021, President Nayib Bukele of El Salvador pushed for Bitcoin to become legal tender with a bang, alongside the US dollar.
However, the IMF has opposed this policy from the beginning, believing that Bitcoin may pose risks to the country's financial stability, and has repeatedly urged El Salvador to reduce the scope of its Bitcoin policies.
According to reports from the Financial Times, in order to obtain a 1.3 billion USD loan from the IMF, as well as an additional 1 billion USD each from the World Bank and the Inter-American Development Bank (IDB), El Salvador plans to compromise and no longer require all national merchants to accept Bitcoin as a payment method, allowing merchants to choose whether to accept Bitcoin payments.
This total aid amounting to 3 billion USD is undoubtedly a 'timely rain' for El Salvador, which is under heavy financial pressure.
Bitcoin adoption is not as expected, and the impact of policy adjustments is limited.
Although Bitcoin has won El Salvador considerable exposure internationally, its actual application has not met expectations.
According to a survey conducted earlier this year, as many as 88% of Salvadorans did not use Bitcoin for transactions at all in 2023. Many merchants nominally accept Bitcoin payments, but the actual usage is pitifully low. Therefore, the direct impact of this policy adjustment on the domestic Bitcoin ecosystem may not be as significant as the outside world imagines.
There are multiple conditions from the IMF, and the pressure for fiscal reform is high.
In addition to relaxing Bitcoin payment regulations, El Salvador must also commit to cutting government spending, increasing taxes, and reducing the fiscal deficit to 3.5% of GDP within 3 years.
Moreover, the IMF also requires El Salvador to pass anti-corruption legislation and increase foreign exchange reserves, indicating that the IMF is not only concerned about Bitcoin's impact on the national financial system but also focused on El Salvador's overall financial health.
As the first country in the world to attempt 'Bitcoinization,' every step taken by El Salvador provides insights into the global cryptocurrency development. This national-level Bitcoin experiment, although full of controversy and challenges, is far from over.
In the future, how El Salvador balances the fiscal regulations of the IMF with the freedom of Bitcoin policies will become a focus of global attention.
Aid negotiations are ongoing! The IMF demands that El Salvador: limit (Bitcoin law), reduce Bitcoin investments.
"Compromise with the IMF for life-saving money? Report: El Salvador will amend laws and no longer force Bitcoin payments" This article was first published on (Blockcast).
