Key Takeaways
El Salvador is in talks to secure a $1.3 billion loan from the International Monetary Fund (IMF), but this requires changes to its Bitcoin legal tender law. To comply with the IMF conditions, the country plans to make accepting Bitcoin voluntary for businesses.
El Salvador is close to finalizing an agreement with the IMF on the loan program, which necessitates modifications to its Bitcoin legal tender law and deficit reductions. Under the proposed terms, businesses will no longer be required to accept Bitcoin as payment, but it will be optional. Additionally, the government commits to reducing its budget deficit by 3.5% of GDP over three years through spending cuts and tax increases, while increasing reserves from $11 billion to $15 billion.
If the deal is approved, it could unlock an additional $2 billion in lending from the World Bank and Inter-American Development Bank over the upcoming years.
The IMF has previously expressed concerns about the financial risks associated with El Salvador’s use of Bitcoin, particularly in terms of financial stability, integrity, and consumer protection. Therefore, the IMF has recommended that El Salvador narrow the scope of its Bitcoin law, which would involve strengthening regulatory oversight and reducing public sector exposure to cryptocurrency. The IMF aims to promote macroeconomic stability and sustainable growth in the country.
Under the leadership of President Nayib Bukele, who is a strong supporter of Bitcoin and recently won re-election with 85% of the vote, El Salvador is determined to advance its pro-Bitcoin agenda.
Although the government has been promoting Bitcoin, most Salvadorans still prefer to use the US dollar as their primary currency for daily transactions.
