El Salvador has announced plans to increase Bitcoin purchases for its national reserve starting next year. This comes just after the country secured a $1.4 billion loan agreement with the International Monetary Fund (IMF).
The deal forces El Salvador to scale back its Bitcoin policies, but the administration isn’t backing down on its commitment to the cryptocurrency.
The Chivo wallet, the country’s official Bitcoin wallet, will either be sold or retired as part of the reforms tied to the IMF agreement. Stacy Herbert, Director of the National Bitcoin Office, confirmed the decision, saying, “Bitcoin isn’t going anywhere, and neither are we.”
IMF wants change, but Bitcoin stays
Now this loan is a big deal for El Salvador’s struggling economy, even if it comes with a few strings attached. Private businesses will now have the choice of whether to accept Bitcoin, and the government’s involvement in crypto-related activities will be tightly restricted.
“The potential risks of the Bitcoin project will be significantly reduced,” the IMF said in its statement.
“For the public sector, engagement in Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined. Taxes will only be paid in U.S. dollars and the government’s participation in the crypto e-wallet (Chivo) will be gradually unwound.”
The deal is still pending approval from the IMF’s executive board. This is a stark departure from President Nayib Bukele’s bold approach. In 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender.
Bukele’s gamble on Bitcoin, which included using public funds to buy the asset and promote it to the population, got him sharp criticism from the IMF and other financial institutions.
But he isn’t backing down. He took a victory lap to celebrate Bitcoin’s price rally past $100,000 last month, saying, “I TOLD YOU SO.”
At press time, Bitcoin was worth around $100,300, and El Salvador’s holdings are now worth more than $620 million.
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