El Salvador legitimised BTC as a legal tender in 2021
The country’s pro-BTC policies have been criticised by the IMF
The IMF had withheld funds to El Salvador since April 2024
El Salvador and the IMF agreed on terms of the deal in December 2024
Photo Credit: X/ PresidenciaSV
El Salvador is introducing reforms to the use of Bitcoin in its financial and industrial sectors. The Central American country has agreed on a deal with the International Monetary Fund (IMF) to receive a loan of $1.4 billion (roughly Rs. 12,130 crore). As part of the agreement between the IMF and El Salvador, the government will limit its engagement with the world's most widely used cryptocurrency. To align with IMF's condition, El Salvador has made BTC payments voluntary for local merchants in the private sector. A report by Reuters said that this decision was approved and finalised by the country's legislature earlier this week.
Lawmaker Elisa Rosales extended the amendment to the Legislative Assembly for a voting process this week. There were only two votes against the reform, while 55 legislators voted in favour, leading to its finalisation. Rosales said the move would promote and ensure a practical use of the crypto asset that will subsequently strengthen its permanence as a legal tender, Reuters reported added.
El Salvador Rushes Crypto Reforms to Receive IMF Loan
The deal between El Salvador and the IMF was finalised in December 2024. Over the next 40 months, the IMF will give the country a loan of $1.4 billion (roughly Rs. 12,130 crore) to help stabilise the country's economy. At the time, the IMF said, “The Salvadoran authorities and a staff team from the IMF have reached staff-level agreement on a 40-month extended arrangement to address balance of payment needs and support the government's economic reforms. The potential risks of the Bitcoin project will be diminished significantly in line with fund policies. Legal reforms will make acceptance of Bitcoin by the private sector voluntary.”
As part of the agreement, El Salvador will also ‘confine' its public sector's exposure to BTC-related activities. As per the IMF's instructions, the country must accept taxes only in the form of US dollars, and not BTC. In addition, the country has also been asked to gradually unwind its participation in pushing adoption of its crypto wallet ‘Chivo'.
The IMF withheld financial aid to El Salvador since April 2024 Later in October, the IMF asked the country to narrow the scope of its Bitcoin legislation and limit the exposure of the public to this volatile asset.
While El Salvador incurred the IMF's wrath due to its crypto-friendly policies, it also managed to attract Web3 firms to establish their offices in the country. Tether said it would relocate its headquarters to El Salvador. Similarly, Jack Dorsey-backed Bitcoin miner Ocean also moved its head office there last year.
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