IMF Agreement Requires El Salvador to Use Bitcoin
Following a deal with the International Monetary Fund (IMF), El Salvador has formally stopped requiring businesses to accept Bitcoin. Under President Nayib Bukele, the IMF recently granted a $1.4 billion loan for the nation, subject to restrictions on the use of cryptocurrencies by the public sector.
Acceptance of Bitcoin Is Now Voluntary
As part of the agreement, the government will progressively withdraw its involvement in Bitcoin-related activities, and private sector adoption of Bitcoin will henceforth be optional. This includes lowering its participation in Chivo, a state-backed cryptocurrency e-wallet. The new rules also mandate that taxes be paid only in US dollars, El Salvador’s other recognized currency.
Aiming to stabilize the economy, the IMF loan
The IMF explained that the loan is intended to help government-initiated economic reforms while also addressing El Salvador’s balance of payments requirements. Limiting the use of Bitcoin is in line with these objectives for financial stability.
The Bitcoin Experiment in El Salvador
Since about 70% of Salvadorans did not utilize traditional banking institutions, President Bukele made Bitcoin legal tender in September 2021 in an attempt to increase financial inclusion. The government introduced the Chivo Wallet to promote adoption, offering customers a $30 sign-up bonus. Nonetheless, worries about Bitcoin’s volatility were expressed right away.
The Volatile Journey of Bitcoin
Bitcoin was trading at almost $44,000 when El Salvador embraced it. Nonetheless, there have been notable swings in the value of the coin. It had fallen to about $23,000 after a year. More recently, Bitcoin’s value increased by almost 50% to surpass $100,000 after Donald Trump was elected president in November 2024.
Low Salvadoran Adoption Rate
Bitcoin acceptance among citizens has remained modest in spite of government incentives. According to a Central American University survey, 92% of Salvadorans did not use Bitcoin in 2024, underscoring the initiative’s low influence on daily transactions.
