The International Monetary Fund has reached an agreement with El Salvador for a $1.4 billion loan. In return, El Salvador is obliged to radically revise its Bitcoin policy.
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El Salvador receives $1.4 billion from the IMF
Under the terms of a long negotiation the International Monetary Fund (IMF) and El Salvador have reached agreement on an expanded financing mechanism. According to a press release from IMF, El Salvador will benefit from a $1.4 billion loan from the Bretton-Wood institution. This financing is aimed at strengthening fiscal and external stability, as well as helping to create the conditions for stronger, more inclusive growth, reports the IMF.
Financing the IMF in El Salvador could be the first of many. Indeed, further support from the World Bank, the Inter-American Development Bank and other regional development banks could follow. The combined funding package could exceed $3.5 billion.
Restrict Bitcoin in El Salvador in exchange for IMF funding
In return for the $1.4 billion in funding, El Salvador was forced by the IMF to restrict the use of Bitcoin. Several measures have thus been taken to readjust El Salvador’s Bitcoin policy.
Firstly, no economic operator operating in El Salvador will be forced to accept payment in Bitcoin. From now on, acceptance of Bitcoin in the private sector will be on a voluntary basis. This is a positive step, as it brings us back to the very essence of Bitcoin, which is freedom.
In addition, taxes in El Salvador will henceforth be collected in US dollars and never again in Bitcoin. The Salvadoran government will also have to put an end to its Chivo wallet. While the discontinuation of the Chivo wallet is acceptable due to its vulnerabilities, forcing a sovereign state to collect taxes in US dollars, a foreign currency, is problematic.
Finally, El Salvador has been called on to limit Bitcoin purchases with public funds and to tighten its regulation of digital assets, as the IMF. This demand is incomprehensible considering the positive results achieved by El Salvador as a result of its Bitcoin purchases and crypto regulation. Indeed, El Salvador has achieved over 100% profit on its Bitcoin purchases, even Europe salivating. The country attracting investors as well thanks to its clear regulation of the crypto ecosystem.
For the time being, El Salvador appears not to be complying with the IMF’s instructions. The country continues its daily DCA testifies to this El Salvador Bitcoin Office. According to the same source, the country has even purchased 11 bitcoins for over a million dollars on December 20.
The IMF is afraid of Bitcoin
It is curious to note that the IMF made El Salvador’s abandonment of Bitcoin a condition of funding. However, the IMF itself acknowledged in February 2023 that Bitcoin didn’t kill El Salvador. On the contrary, the financial institution acknowledges that El Salvador is doing better economically than it was a few years ago.
In its press release of December 18, 2024, the IMF acknowledges that the Salvadoran economy has continued to recover since the pandemic. The institution notes that the deficit has been reduced, inflation is falling, the fiscal situation is improving very gradually and debts have been paid off. All this progress has also been possible thanks to Bitcoin.
So why fight an asset that is doing so much good in El Salvador? There’s only one reason: the IMF’s hostility to Bitcoin, or fear of the asset. With the growing popularity of this asset and the commitment of several strategic reserves of Bitcoin. The IMF is concerned that a currency over which it has no control will flourish.
CEO and Editor-in-Chief of Coinpri I have been navigating the waters of Blockchain for 5 years already.
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