After securing a $1.4 billion loan from the IMF, El Salvador modifies its Bitcoin strategy.
Details of the IMF Loan
The IMF loan deal with El Salvador is a 40-month extended arrangement under the Extended Fund Facility (EFF). It aims to support the Salvadoran economic reforms, which are an immense need for El Salvador.
The IMF recognized the Salvadoran economy’s growth and the narrowing of the account deficit, raising their credibility. Much of this contributed to securing the deal.
One of the program’s key elements is the management of digital assets. This includes things like making the acceptance of Bitcoin by the Private sector voluntary as opposed to earlier policies.
This also includes limiting the economic activities of the public sector with transactions involving Bitcoin.
The IMF mandated taxes be paid only in US dollars. They also mandated that the government’s participation in cryptocurrency trading gradually be reduced to support transparency.
Moreover, there are plans to regulate and monitor digital assets to safeguard financial stability and protect investors.
El Salvador and the Global Bitcoin Market
In 2021, El Salvador became the first country to declare Bitcoin as a legal tender. It was a measure made to support their economy and one that President Bukele was passionate about. Based on data from Arkham Intelligence, their investment in Bitcoin is worth about $636 million.
When Bitcoin rose after the 2024 US presidential election, it prompted feelings of excitement in President Bukele. This comes especially after his enthusiasm for Bitcoin wasn’t matched by his people.
He reported that his country’s holdings more than doubled in value. He also blamed the lack of adoption by his people on his political rivals.
The Chivo wallet, one cornerstone for Bitcoin adoption, failed to gain traction in El Salvador. Despite the reform, Bukele and his cabinet have not dropped their ambition for cryptocurrency. They have indicated that they will continue purchasing Bitcoin to add to their reserves following the rise.
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