El Salvador to Limit Bitcoin Strategy Under $1.4 Billion IMF Agreement

The IMF and El Salvador have reached an agreement in which the country has committed to reducing risks associated with bitcoin usage in exchange for a financial package.

El FMI y el gobierno de El Salvador alcanzaron un acuerdo a nivel de personal sobre un Programa SAF de 40 meses para apoyar las reformas del gobierno. El acuerdo con sv está sujeto a la aprobación de Directorio Ejecutivo del FMI. https://t.co/n2B23RWNLz pic.twitter.com/xXysGWBeIS

— FMI (@FMInoticias) December 18, 2024

The Fund’s program for the Latin American nation will last 40 months and includes a $1.4 billion loan. The funds are intended to support economic reforms and the country’s balance of payments.

With additional financing from the Inter-American Development Bank and other regional bodies, the total package will exceed $3.5 billion.

“The IMF-supported program aims to strengthen fiscal and external stability, as well as foster conditions for stronger and more inclusive growth,” the Fund stated, confirming El Salvador’s progress in economic reform. 

However, the agreements with the IMF include commitments to make regulatory adjustments to the country’s bitcoin strategy:

• The government will gradually reduce its involvement with the Chivo wallet;
• Taxes will be accepted only in US dollars as El Salvador’s national currency;
• Transactions with the first cryptocurrency in the public sector will be limited;
• For private market participants, accepting bitcoin payments for goods and services will become voluntary.

“Transparency, regulation, and oversight of digital assets will be enhanced to ensure financial stability, consumer and investor protection, and financial integrity,” the Fund added.

In September 2021, El Salvador enacted legislation recognizing bitcoin as legal tender. Services and merchants were required to accept the cryptocurrency.

The government encouraged Salvadorans to use the Chivo wallet by offering $30 in digital gold for app registration.

The state regularly acquired bitcoins and engaged in mining.

According to BitcoinTreasuries, the country holds 5969 BTC valued at approximately $610.5 million at the time of writing.

The IMF has repeatedly criticized El Salvador for adopting bitcoin, suggesting the removal of its status as legal tender and the liquidation of reserves. Fund experts noted that the risks associated with legalization did not materialize only due to the limited use of the digital asset.

According to authorities, the adoption of bitcoin has brought benefits to the country, including an influx of tourists and investments. In 2023, President Nayib Bukele accused the media of downplaying El Salvador’s successes following the adoption of cryptocurrency.

In February 2024, the main proponent of the country’s bitcoin strategy was re-elected for a second term.

Back in August, Bukele assessed the results of cryptocurrency legalization in an interview with TIME as mixed—the initiative brought both positive and negative consequences.