El Salvador is adjusting its Bitcoin strategy as part of a $1.4 billion loan agreement with the International Monetary Fund (IMF). The deal, which aims to reduce the country’s debt-to-GDP ratio, introduces significant changes to the nation’s Bitcoin policies, including voluntary merchant acceptance and scaled-back government involvement.
Bitcoin Adoption Becomes Voluntary
Under the agreement, El Salvador will no longer require merchants to accept Bitcoin as a payment method. The IMF emphasized that private-sector adoption of Bitcoin will now be voluntary, aligning with its longstanding concerns about the risks of cryptocurrency.
“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 said in a Dec. 18 statement.
El Salvador Scaling Back Public Sector Bitcoin Activities
The deal also limits government engagement with Bitcoin-related economic activities. Public-sector transactions and purchases of Bitcoin will be “confined,” and taxes will continue to be paid in U.S. dollars, the country’s official currency.
El Salvador’s state-backed crypto wallet, Chivo, which saw minimal usage since its launch in 2021, will also see a gradual reduction in government involvement, according to the IMF.
Despite these policy shifts, El Salvador remains committed to its Bitcoin holdings. The country has accumulated 5,968.8 BTC, valued at approximately $602 million, according to the National Bitcoin Office.
A spokesperson for the office told Cointelegraph that the country will continue accumulating Bitcoin. “We will keep buying one Bitcoin a day (likely even more in the future), and we will not sell any of our current holdings,” they said, reiterating that Bitcoin remains central to the country’s economic strategy.
IMF Agreement Marks a Milestone in Bitcoin Policy
The agreement, which awaits approval from the IMF Executive Board, concludes four years of negotiations with the global lender. This includes President Nayib Bukele’s historic decision in 2021 to adopt Bitcoin as legal tender, making El Salvador the first nation to do so.
The IMF has consistently urged Bukele to abandon the Bitcoin initiative, citing the cryptocurrency’s speculative nature and potential risks to economic stability. However, the agreement paves the way for additional loans from other international financial institutions, including the World Bank, pushing El Salvador’s total financing package to over $3.5 billion.
Mixed Reactions to the Policy Shift
While the IMF views the changes as necessary, reactions within El Salvador remain divided. Max Keiser, a Bitcoin advisor to President Bukele, dismissed the IMF’s involvement, calling the agreement “bureaucratic, meaningless nonsense.”
Keiser argued on X (formerly Twitter) that Bitcoin usage in El Salvador has grown and remains voluntary. “Bitcoin use in El Salvador was always voluntary, and its usage has never been higher and continues to grow,” he wrote.
However, surveys paint a different picture. An October 2024 poll revealed that 92% of Salvadorans do not use Bitcoin for transactions, up from 88% in 2023.
