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El Salvador, the first country to adopt Bitcoin as legal tender, is adjusting its approach to satisfy IMF conditions. The government aims to secure a $1.3B IMF loan by making Bitcoin acceptance optional, potentially unlocking billions in additional global financing.
El Salvador Revisits Bitcoin Policy Amid IMF Pressure
Under pressure from the International Monetary Fund (IMF), El Salvador, the world's first government to accept Bitcoin as legal cash, is allegedly reducing its BTC ambitions.
The Financial Times reported on December 9th, citing sources familiar with the subject, that El Salvador is planning to negotiate a $1.3 billion loan arrangement with the International Monetary Fund (IMF) in exchange for revisions to its Bitcoin Law.
If the agreement is finalized, the El Salvadorian government would no longer mandate that businesses take Bitcoin as payment; instead, it will be an optional payment option.
With the deal's finalization expected within the next two or three weeks, the World Bank and the Inter-American Development Bank are both expected to lend an additional $1 billion over the next several years.
IMF Warns Against Bitcoin Adoption Risks
For quite some time, the International Monetary Fund has voiced its opposition to El Salvador's proposal to accept Bitcoin as legal cash in September 2021, citing concerns about the potential impact on the country's financial stability. President Nayib Bukele and the government have been warned of these risks on multiple occasions, Cointelegraph points out.
Prior to El Salvador's July 2021 Bitcoin law adoption, the International Monetary Fund (IMF) issued a warning about potential customer problems associated with the decision to use Bitcoin instead of fiat currency for payments. The text read:
“If goods and services were priced in both a real currency and a crypto asset, households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities.”
El Salvador’s Bitcoin Accumulation Strategy
El Salvador was cautioned by the International Monetary Fund (IMF) in February 2023 to deal with Bitcoin-related concerns since the country's adoption of the cryptocurrency "had not materialized." Based on data from CoinGecko, the price of Bitcoin was approximately $21,600 at that moment.
Following the adoption of the Bitcoin Law in September 2021, El Salvador began buying Bitcoin on September 6, 2021, with its first purchase of 200 BTC.
Since then, the government has kept buying Bitcoin, with plans to buy one every day and 5,942 BTC in the bank as of November 2024.
Unrealized Gains Amid Bitcoin’s Record Highs
El Salvador's unrealized gains on its Bitcoin purchases reached over $300 million when the cryptocurrency climbed to record highs beyond $100,000 in early December 2024.
El Salvador's government and the International Monetary Fund have been in talks on the $1.3 billion loan and potential Bitcoin law amendments since at least October 2024.
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