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El Salvador will limit its Bitcoin mandates, reducing public sector activity and merchant obligations under a $1.4 billion IMF loan agreement aimed at lowering its debt-to-GDP ratio.
IMF Loan Prompts El Salvador to Limit Bitcoin Use
As part of a $1.4 billion loan deal with the International Monetary Fund, El Salvador is going to limit public sector engagement in Bitcoin-related economic activities, make merchant adoption of Bitcoin voluntary, and unwind its involvement in the little-used Chivo wallet.
After El Salvador agreed to measures to lower its debt-to-GDP ratio, the global lender announced on December 18 that the Central American nation will receive $1.4 billion from the IMF over the next 40 months.
“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,” the IMF stated.
“For the public sector, engagement in Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined.”
According to the Bitcoin Office's tracker, El Salvador started purchasing Bitcoin in 2021 and now has 5,968.8 Bitcoin, which is worth almost $602 million.
Chivo Wallet and Bitcoin Taxes Under Review
Cointelegraph did not immediately hear back from the National Bitcoin Office of El Salvador regarding their comment request.
Additionally, the International Monetary Fund has stated that taxes will only be paid in US dollars, the official currency of the country, and that the government's role in the Chivo state-backed crypto wallet "will be gradually unwound."
President Nayib Bukele made history in June 2021 when he became his country the first in the world to accept Bitcoin as legal cash. The accord, which is subject to approval by the IMF Executive Board, concludes four years of tumultuous negotiations.
IMF Highlights Risks of Bitcoin Adoption
Because of the inherent risk associated with Bitcoin's speculative character, the International Monetary Fund has long urged Bukele to abandon its Bitcoin plans.
The World Bank and other international financial institutions will contribute further loans to the arrangement, bringing the overall funding deal to nearly $3.5 billion.
Bitcoin expert and Bukele advisor Max Keiser criticized the International Monetary Fund (IMF) on X, saying that "nobody pays attention to these assh****" and that the deal was "bureaucratic, meaningless, nonsense."
Salvadorans Show Limited Interest in Bitcoin
"Bitcoin use in El Salvador was always voluntary and its usage has never been higher and continues to grow," Keiser wrote in another X post. “The IMF’s point is DOA [dead on arrival].”
Having said that, a poll conducted in October among Salvadorans revealed that 92% do not use Bitcoin for transactions. This is a rise over a study conducted in 2023, which revealed that 88% did not use Bitcoin.
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