El Salvador, the first country to adopt Bitcoin as legal tender, is reportedly preparing to scale back its Bitcoin ambitions to secure a $1.3 billion loan agreement with the International Monetary Fund (IMF). According to a report by the Financial Times on December 9, the agreement would require the government to remove a legal mandate for businesses to accept Bitcoin, making its use entirely voluntary.
The deal is expected to be finalized within the next few weeks and is anticipated to unlock an additional $1 billion in funding from the World Bank and another $1 billion from the Inter-American Development Bank over the coming years.
The IMF has consistently voiced opposition to El Salvador’s Bitcoin Law, warning of financial stability risks since the country adopted the cryptocurrency as legal tender in September 2021. Prior to the law’s enactment, the IMF cautioned that businesses and households might face complications in choosing between Bitcoin and fiat currency, potentially diverting focus from productive activities.
In February 2023, the IMF reiterated its concerns, arguing that Bitcoin adoption in El Salvador had yet to deliver its promised benefits. At that time, Bitcoin traded around $21,600, far from its current highs.
Despite these warnings, El Salvador has continued accumulating Bitcoin since 2021, with the government committing to daily purchases. As of November 2024, El Salvador holds 5,942 BTC. The country’s Bitcoin holdings saw significant unrealized gains exceeding $300 million when Bitcoin surged past $100,000 in early December 2024.
Discussions between the IMF and El Salvador regarding the $1.3 billion loan and potential amendments to the Bitcoin Law have been ongoing since October 2024. Should the agreement proceed, it would mark a significant shift in El Salvador’s cryptocurrency policy as it balances its Bitcoin agenda with international financial pressures.