El Salvador to change Bitcoin plans to secure $1.3bn IMF loan

• El Salvador would also receive $1 billion in lending from the World Bank and $1 billion from the Inter-American Development Bank
• Under the IMF agreement, El Salvador would change a legal requirement making businesses accept Bitcoin as payment
• Since 2021, the IMF has been against El Salvador’s Bitcoin Law, asking the government to “narrow its scope”

El Salvador is reportedly reducing its Bitcoin ambitions as it gets ready to receive a $1.3 billion loan from the International Monetary Fund (IMF).

The Financial Times reports that the Central American country, which was the first to accept Bitcoin as legal tender in 2021, is expected to reach a deal in the next few weeks with El Salvador’s President Nayib Bukele’s government.

The deal is also expected to unlock a further $1 billion in lending from the World Bank and $1 billion from the Inter-American Development Bank over the next few years.

Under the proposed plans, El Salvador would change a legal requirement making businesses accept Bitcoin as payment, making it optional instead. The government would also reduce the budget deficit by 3.5% of GDP over three years through spending cuts and tax rises while boosting reserves from $11 billion to $15 billion.

IMF against El Salvador’s Bitcoin adoption

Following El Salvador’s adoption of Bitcoin in 2021, the IMF sent a statement in November 2021 “recommend[ing] narrowing the scope of the Bitcoin law” while “strengthening the regulation and supervision of the new payment system.”

This was again called for in January 2022 when the IMF advised El Salvador to reconsider its decision on Bitcoin as the country’s legal tender. More recently, the IMF recommended El Salvador limit the public’s exposure to Bitcoin.

Despite the advisories, El Salvador and its president remain committed to Bitcoin, going on to buy more of the asset during price dips.

With Bitcoin reaching $100,000 last week for the first time, Bukele posted a tweet on X, showcasing its Bitcoin balance was now worth more than $600 million.

https://t.co/QVvFbQ7woa pic.twitter.com/WiOAYg6Ztx

— Nayib Bukele (@nayibbukele) December 5, 2024