The International Monetary Fund (IMF) is attempting to impose strict restrictions on El Salvador as part of a $1.4 billion loan agreement, targeting the country’s controversial Bitcoin (BTC) adoption strategy.
Under new conditions in the IMF’s Staff Country Report, El Salvador must halt public sector acquisitions of the BTC, dissolve the Fidebitcoin trust fund by July 2025, and cease operations of its Chivo wallet system.
The government must also publicly disclose all Bitcoin wallet addresses and provide audited financial statements for crypto-related entities.
President Nayib Bukele, a vocal Bitcoin proponent, pioneered the crypto king’s legal tender status in 2021, making El Salvador the first nation to do so. His administration has actively invested public funds in BTC and promoted the top crypto by market cap’s widespread use.
The IMF cited economic stability concerns as the primary motivation for the restrictions, and says that the use of BTC has been “marginal.”
“Although crypto-assets have the potential to make payments cheaper and faster, widespread adoption could threaten macroeconomic stability and raise fiscal risks.9 In El Salvador, monetary and financial stability risks have been contained due to Bitcoin’s limited circulation, in a context where the US dollar can also be freely used.
The use of Bitcoin as means of payment has been minimal, reflecting Bitcoin’s high price volatility and limited trust in the technology. Meanwhile, the financial sector has no exposure to Bitcoin, and payment of taxes in Bitcoin, which will be prohibited following legal reforms, have been insignificant.”
According to the IMF’s report, El Salvador has agreed to cease making government purchases of BTC.
“Another important objective of the program is to have no net accumulation of domestic payments arrears (payments obligations overdue by 90 days or more) as part of the process of strengthening public financial management in El Salvador. Hence, we commit not to accumulate net domestic payments arrears by the central government.”
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