El Salvador agrees to scale back Bitcoin policies for $1.4 billion IMF loan

El Salvador has agreed to adjust its Bitcoin policies as part of a $1.4 billion loan arrangement with the International Monetary Fund (IMF), according to a Dec. 18 statement.

The global financial regulator stated that it had reached a staff-level agreement with El Salvador on a 40-month Extended Fund Facility (EFF). The funds aim to support the country’s economic reforms.

The loan deal marks a significant milestone, concluding nearly four years of discussions. To secure the agreement, El Salvador committed to reforms that included improving its primary balance by 3.5% of GDP over three years. This effort is expected to lower the public debt-to-GDP ratio from its 2024 peak of 85%.

Bitcoin policy reforms

The IMF stated that the agreement requires El Salvador to scale back some of its Bitcoin-related activities. 

Under the new terms, Bitcoin acceptance by private businesses will become voluntary rather than mandatory. Public sector engagement in Bitcoin-related activities will also be reduced. Also, tax payments will only be accepted in US dollars going forward.

The IMF stated:

” Legal reforms will make acceptance of Bitcoin by the private sector voluntary. For the public sector, engagement in Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined.”

Meanwhile, the government is also expected to gradually wind down its involvement with the Chivo e-wallet, a crypto app launched in 2021. Initially incentivized with $30 in Bitcoin for new users, Chivo has steadily declined in adoption and usage.

Stacking BTC

Despite the policy changes, El Salvador remains committed to acquiring Bitcoin.

The National Bitcoin Office (ONBTC) reaffirmed on Dec. 18 that the country is purchasing one Bitcoin daily, a strategy President Nayib Bukele announced in November 2022.

This approach has yielded significant gains. Recently, Bukele highlighted a $362 million unrealized profit from El Salvador’s Bitcoin holdings, which exceed 6,000 BTC.

Earlier this year, the president reiterated that the country would continue its daily Bitcoin purchases until they become unaffordable with fiat currencies.

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