El Salvador to Scale Back Bitcoin Ambitions
- El Salvador would also receive $1 billion in lending from the World Bank and $1 billion from the Inter-American Development Bank
- Under the IMF agreement, El Salvador would change a legal requirement making businesses accept Bitcoin as payment
- Since 2021, the IMF has been against El Salvador’s Bitcoin Law, asking the government to “narrow its scope”
El Salvador is reportedly reducing its Bitcoin ambitions as it gets ready to receive a $1.3 billion loan from the International Monetary Fund (IMF).
The Financial Times reports that the Central American country, which was the first to accept Bitcoin as legal tender in 2021, is expected to reach a deal in the next few weeks with El Salvador’s President Nayib Bukele’s government.
The deal is also expected to unlock a further $1 billion in lending from the World Bank and $1 billion from the Inter-American Development Bank over the next few years.
Proposed Changes Under IMF Agreement
Under the proposed plans, El Salvador would make significant changes:
- Legal Requirement: Change the legal requirement making businesses accept Bitcoin as payment, making it optional instead
- Budget Deficit: Reduce the budget deficit by 3.5% of GDP over three years through spending cuts and tax rises
- Reserves: Boost reserves from $11 billion to $15 billion
IMF’s Stance on El Salvador’s Bitcoin Adoption
Since El Salvador’s adoption of Bitcoin in 2021, the IMF has been against it:
- In November 2021, the IMF recommended narrowing the scope of the Bitcoin law and strengthening regulation and supervision of the new payment system
- In January 2022, the IMF advised El Salvador to reconsider its decision on Bitcoin as legal tender
- Recently, the IMF recommended El Salvador limit the public’s exposure to Bitcoin
Despite the IMF advisories, El Salvador and President Bukele remain committed to Bitcoin, even buying more of the asset during price dips.
With Bitcoin reaching $100,000 for the first time, Bukele showcased a Bitcoin balance worth more than $600 million.
