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  • El Salvador approves new bill to comply with IMF deal

    El Salvador approves new bill to comply with IMF deal

    • The reform passed with 55 votes, with only two against
    • El Salvador became the first country to accept Bitcoin as legal tender in 2021
    • In December, El Salvador announced it was changing its Bitcoin law to secure a $1.3bn loan from the IMF

    El Salvador’s Congress has approved a bill to change its Bitcoin law to comply with a deal it struck with the International Monetary Fund (IMF).

    On January 29, Reuters reported that the bill was approved minutes after President Nayib Bukele sent it.

    The reform passed with 55 votes, with only two against. Under El Salvador’s Bitcoin law, it required businesses to accept Bitcoin if they were able to do so. Ruling party lawmaker Elisa Rosales said it was required to ensure Bitcoin’s “permanence as legal tender” while facilitating its “practical implementation.”

    Legal tender

    El Salvador became the first country to accept Bitcoin as legal tender in 2021. At the time, it was reported that all businesses must accept Bitcoin. The move soon attracted the attention of the IMF.

    Following El Salvador’s adoption of Bitcoin in 2021, the IMF sent a statement in November 2021 “recommend[ing] narrowing the scope of the Bitcoin law” while “strengthening the regulation and supervision of the new payment system.”

    This was again called for in January 2022, when the IMF advised El Salvador to reconsider its decision to make Bitcoin the country’s legal tender. More recently, the IMF recommended that El Salvador limit the public’s exposure to Bitcoin.

    New deal

    In December, El Salvador changed its Bitcoin plans to secure a $1.3 billion loan from the IMF.

    Under the plans, El Salvador would change a legal requirement making businesses accept Bitcoin as payment, making it optional instead. The government would also reduce the budget deficit by 3.5% of GDP over three years through spending cuts and tax rises while boosting reserves from $11 billion to $15 billion.

    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.

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  • El Salvador to ‘confine’ its Bitcoin activities in $1.4bn loan deal with the IMF

    El Salvador to ‘confine’ its Bitcoin activities in $1.4bn loan deal with the IMF

    • The IMF said “potential risks” of El Salvador’s Bitcoin project will be “diminished significantly”
    • A Bitcoin podcaster questioned the true cost of the IMF’s monetary assistance to El Salvador
    • El Salvador will receive additional funding from other major banks in a financial package totaling over $3.5 billion

    El Salvador will receive a $1.4 billion loan from the International Monetary Fund (IMF) over the next 40 months as it “confines” its Bitcoin-related activities.

    The IMF is to loan the amount to the Central American country under the Extended Fund Facility (EFF) so it can support the government’s economic reforms.

    “The potential risks of the Bitcoin project will be diminished significantly in line with Fund policies,” the IMF said in a statement.

    The IMF said that acceptance of Bitcoin by the private sector will be made voluntary while engagement in “Bitcoin-related economic activities and transactions in and purchases of Bitcoin will be confined.”

    Taxes will only be paid in US dollars, the IMF noted, adding that El Salvador’s government participation in its Chivo crypto wallet “will be gradually unwound.”

    “Transparency, regulation, and supervision of digital assets will be enhanced to safeguard financial stability, consumer and investor protection, and financial integrity,” the IMF said.

    Juan, a Bitcoin podcaster, said on X that it’s like “watching a chess game where every move is calculated for economic recovery,” adding “yet it also raises questions about the true cost of such ‘assistance.’”

    Changing plans

    Earlier this month, it was reported that El Salvador was reducing its Bitcoin ambitious to secure the IMF loan.

    As well as making the acceptance of Bitcoin voluntary, the government would also reduce its budget deficit by 3.5% of GDP over three years through spending cuts and tax rises while boosting reserves from $11 billion to $15 billion.

    El Salvador is expected to receive additional funding support from the World Bank, the Inter-American Development Bank, and other regional development banks. In total, the overall financial package will reach over $3.5 billion.

    El Salvador began accepting Bitcoin as legal tender in 2021, making it the first to do so.

    Following El Salvador’s adoption, the IMF sent a statement in November 2021 “recommend[ing] narrowing the scope of the Bitcoin law” while “strengthening the regulation and supervision of the new payment system.”

    This was again called for in January 2022 when the IMF advised El Salvador to reconsider its decision on Bitcoin as the country’s legal tender. More recently, the IMF recommended El Salvador limit the public’s exposure to Bitcoin.

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  • El Salvador to change Bitcoin plans to secure $1.3bn IMF loan

    El Salvador to change Bitcoin plans to secure $1.3bn IMF loan

    • 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.

    Under the proposed plans, El Salvador would change a legal requirement making businesses accept Bitcoin as payment, making it optional instead. The government would also reduce the budget deficit by 3.5% of GDP over three years through spending cuts and tax rises while boosting reserves from $11 billion to $15 billion.

    IMF against El Salvador’s Bitcoin adoption

    Following El Salvador’s adoption of Bitcoin in 2021, the IMF sent a statement in November 2021 “recommend[ing] narrowing the scope of the Bitcoin law” while “strengthening the regulation and supervision of the new payment system.”

    This was again called for in January 2022 when the IMF advised El Salvador to reconsider its decision on Bitcoin as the country’s legal tender. More recently, the IMF recommended El Salvador limit the public’s exposure to Bitcoin.

    Despite the advisories, El Salvador and its president remain committed to Bitcoin, going on to buy more of the asset during price dips.

    With Bitcoin reaching $100,000 last week for the first time, Bukele posted a tweet on X, showcasing its Bitcoin balance was now worth more than $600 million.

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  • IMF recommends El Salvador to limit the public’s exposure to Bitcoin

    IMF recommends El Salvador to limit the public’s exposure to Bitcoin

    The IMF building in Washington DC
    • The IMF wants El Salvador to limit “public sector exposure to Bitcoin”
    • The financial agency’s remarks follow an August statement, which talked about “mitigat[ing] the risks from Bitcoin”

    The International Monetary Fund (IMF) has recommended that El Salvador reduce the scope of its Bitcoin law and limit the public’s exposure to Bitcoin.

    During a press conference, IMF spokesperson Julie Kozack said:

    “What we have recommended is a narrowing of the scope of the Bitcoin law, strengthening the regulatory framework and oversight of the Bitcoin ecosystem, and limiting public sector exposure to Bitcoin.”

    Kozack added that the IMF continues talking with El Salvador and that “addressing risks arising from Bitcoin is a key element of these discussions.”

    The Central American country is no stranger to the IMF’s views on its use of Bitcoin. Notably, the issue goes back to 2021 when El Salvador made Bitcoin legal tender. Following its official adoption, the IMF released a statement in November 2021 “recommend[ing] narrowing the scope of the Bitcoin law” while “strengthening the regulation and supervision of the new payment system.”

    This was again called for in January 2022 when the IMF advised El Salvador to reconsider its decision on Bitcoin as the country’s legal tender.

    More recently, the IMF released a statement in August that focused on, among other things, the need to “mitigate the risks from Bitcoin.” However, the financial agency did note that while “many of the risks have not materialized, there is joint recognition that further efforts are needed to enhance transparency..” in Bitcoin.

    Still committed to Bitcoin

    Despite these remarks from the IMF and the continued back-and-forth, El Salvador remains unchanged in its mission to see Bitcoin rise in the country.

    However, while the government is keen to see adoption numbers rise, Nayib Bukele, El Salvador’s pro-Bitcoin president, knows more work needs to be done. In a recent interview with TIME magazine, Bukele admitted that his Bitcoin strategy for El Salvador had been “net positive,” but it hasn’t witnessed the “widespread adoption” they hoped for.

    Despite this, Bukele remains committed, even going so far as to buy additional Bitcoin when the price drops. The country also promised to use the profit it makes from its Bitcoin Trusts to build 20 schools as it works at making crypto more appealing to its citizens.

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