El Salvador has reached an agreement with the International Monetary Fund (IMF) to restrict various Bitcoin-related activities in exchange for a $1.4 billion loan. The deal is part of a broader effort to promote fiscal and external stability in the country. As part of the agreement, El Salvador will limit public sector Bitcoin purchases, ensure taxes are paid exclusively in U.S. dollars, and wind down the government-provided Bitcoin wallet, Chivo.
The financing package is expected to exceed $3.5 billion with additional support from the World Bank, the Inter-American Development Bank, and other regional development banks. The IMF views this collaboration as essential for bolstering El Salvador’s financial system and addressing potential risks associated with its earlier embrace of cryptocurrency.
In June 2021, under the leadership of President Nayib Bukele, El Salvador became the first country to officially recognize Bitcoin as legal tender. This groundbreaking move aimed to enhance financial inclusion and position the nation as a trailblazer in cryptocurrency adoption. Now, a new agreement allows private sector entities to adopt Bitcoin voluntarily, signaling a major departure from the compulsory provisions of the 2021 Bitcoin Law.
The agreement remains subject to final approval from the IMF board, dependent on El Salvador enacting essential fiscal and regulatory reforms. If approved, it is anticipated to stabilize the country’s economy while refining its stance on cryptocurrency use.