El Salvador is reportedly preparing to amend its groundbreaking Bitcoin Law as part of a deal to secure a $1.3 billion loan program from the International Monetary Fund (IMF). The proposed change would make accepting bitcoin as payment voluntary for businesses, rather than mandatory as currently stipulated.
According to a recent Financial Times report, this concession is a key condition set by the IMF for approving the loan. The move is part of a larger financial package expected to total $3.3 billion, with the World Bank and the Inter-American Development Bank each contributing an additional $1 billion. A final agreement is anticipated within the next two to three weeks.
El Salvador’s adoption of bitcoin as legal tender in 2021, alongside the US dollar, sent shockwaves through the global financial system. President Nayib Bukele championed the move, establishing a bitcoin treasury which currently holds nearly $600 million worth of the cryptocurrency at current market prices.
However, the IMF has consistently voiced concerns about the potential risks of El Salvador’s bitcoin strategy to the country’s financial stability. This proposed legal modification appears to be a direct response to those concerns.
The impact of this change on bitcoin adoption within El Salvador is likely to be minimal. A study by the Central American University earlier this year revealed that 88% of surveyed Salvadorans had not used bitcoin in 2023, suggesting limited organic uptake.
The IMF loan comes with other conditions as well. The Salvadoran government will be required to implement austerity measures, including spending cuts and tax increases, to reduce its budget deficit to 3.5% of GDP over the next three years. Further requirements include increasing reserves and enacting anti-corruption legislation.
Beyond the Bitcoin Law, El Salvador’s National Commission of Digital Assets (CNAD) has already established a comprehensive regulatory framework for cryptocurrencies.
