The IMF has approved $1.4 billion for El Salvador but demands modifications to its bitcoin policy, which include prohibiting bitcoin accumulation and making acceptance voluntary. These changes aim to address financial stability concerns. Although bitcoin remains legal tender, the government is adopting a more cautious stance in cryptocurrency management to mitigate associated risks, ensuring economic stability and investor confidence.
On March 3, 2025, the International Monetary Fund (IMF) approved a $1.4 billion extended facility for El Salvador, supporting its economic reform program after the country agreed to modify its bitcoin policy. This modification comes in response to the IMF’s concerns regarding potential financial stability risks associated with bitcoin adoption, which El Salvador first embraced in 2021 under President Nayib Bukele.
The IMF’s stipulations include prohibiting the accumulation of bitcoin and making acceptance of it voluntary for businesses, allowing merchants to opt out without potential penalties. This aims to relieve concerns over bitcoin’s volatility impacting local businesses’ financial health.
Additionally, the Salvadoran government will limit public sector bitcoin accumulation and restrict issuing financial instruments linked to cryptocurrency. This strategy is intended to reduce state exposure to fluctuations in the cryptocurrency market, ensuring government financial stability amid changing market conditions.
The government’s official cryptocurrency wallet, Chivo, is set to be sold or closed to shift focus on encouraging private sector innovations in cryptocurrency-related financial services. Despite the imposed restrictions, bitcoin remains legal tender in El Salvador, indicating the government’s ongoing belief in the cryptocurrency’s potential.
The revised agreement with the IMF is crucial for investor confidence and economic stability in El Salvador, possibly facilitating future funding from other financial institutions like the World Bank. Nonetheless, the effectiveness of the implementation of these new guidelines remains to be seen, especially in light of previous actions where El Salvador acquired substantial bitcoin holdings despite IMF recommendations.
The IMF’s recent agreement with El Salvador marks a significant shift in the country’s approach to bitcoin as legal tender. Key measures include prohibiting bitcoin accumulation and making its acceptance voluntary for businesses, which highlight the IMF’s concerns over financial stability. While maintaining the legal status of bitcoin, El Salvador is adopting a more cautious approach to leverage cryptocurrency benefits while minimizing risks. The future implementation of these changes will be crucial for the country’s financial framework.
Original Source: www.cointribune.com
